Fair Value Measurement

12 Months Ended

Sep. 30, 2011

Fair Value Disclosures [Abstract]

Fair Value Measurement

4.    Fair Value Measurement

ASC Topic 820 (“ASC 820”, originally issued as SFAS No. 157, Fair Value Measurements) applies under other accounting pronouncements that require or permit fair value measurements, the FASB having previously concluded in those accounting pronouncements that fair value is the relevant measurement attribute. Accordingly, ASC 820 does not require any new fair value measurements. The fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. The three levels of inputs used are as follows:

Level 1 — Quoted prices in active markets for identical assets or liabilities.

Level 2 — Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3 — Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

As of September 30, 2010 and 2011, the Company had assets and liabilities that fell under the scope of ASC 820. The fair value of the Company’s warrant liability was determined by the Monte Carlo simulation method for the warrants issued in connection with the Company’s August 2010 financing and by the Black-Scholes valuation model for the warrants issued in connection with the Company’s May 2011 financing. The Monte Carlo simulation method is a generally accepted statistical method used to generate a defined number of stock price paths in order to develop a reasonable estimate of the range of future expected stock prices of the Company and its peer group and minimizes standard error. The Black-Scholes valuation model takes into account, as of the valuation date, factors including the current exercise price, the expected life of the warrant, the current price of the underlying stock and its expected volatility, expected dividends on the stock, and the risk-free interest rate for the term of the warrant. Accordingly, the Company’s fair value measurements of the Company’s marketable securities are classified as a Level 1 input and the warrant liability as a Level 3 input.

The fair value of the Company’s financial assets and liabilities carried at fair value and measured on a recurring basis are as follows:

Description	Fair Value at September 30, 2011			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Market Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	38,701		$	38,701	$	—	$	—
Restricted cash		60			60		—		—
Subtotal		38,761			38,761		—		—
Liabilities:
Common stock warrant liability		(996	)		—		—		(996	)
Subtotal		(996	)		—		—		(996	)
Total	$	37,765		$	38,761	$	—	$	(996	)

Description	Fair Value at September 30, 2010			Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Market Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash and cash equivalents	$	22,922		$	22,922	$	—	$	—
Restricted cash		150			150		—		—
Marketable securities:
US government agency securities (short-term securities)		6,001			6,001		—		—
Subtotal		29,073			29,073		—		—
Liabilities:
Common stock warrant liability		(4,169	)		—		—		(4,169	)
Subtotal		(4,169	)		—		—		(4,169	)
Total	$	24,904		$	29,073	$	—	$	(4,169	)

The Company recognizes transfers into and out of the levels indicated above on the actual date of the event or change in circumstances that caused the transfer of change. All changes within Level 3 can be found in the following Level 3 reconciliation table below:

Balance at September 30, 2009	$	—
August 2010 warrant — initial fair value at the date of issuance		(2,915	)
Increase in fair value		(1,254	)
Balance at September 30, 2010		(4,169	)
May 2011 warrant — initial fair value at the date of issuance		(9,438	)
Exercise of warrants		29
Decrease in fair value		12,582
Balance at September 30, 2011	$	(996	)

As of September 30, 2010, the Company classified all the marketable securities with original maturities of three months or less at the date of purchase as cash equivalents. As of September 30, 2011, the Company had $0 in marketable securities.