STOCK BASED COMPENSATION

9 Months Ended

Jun. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK BASED COMPENSATION

STOCK BASED COMPENSATION

Under all stock option plans, a total of 4.1 million shares of common stock have been reserved for issuance and 0.6 million shares are available for future grant as of June 30, 2012. The 2010 Incentive Plan permits the grant of stock options, stock appreciation rights, stock awards, performance awards, restricted stock and stock units, and other stock and cash-based awards.

As of June 30, 2012, none of our stock-based awards are classified as liabilities. We did not capitalize any stock-based compensation cost.

Compensation cost related to our stock-based compensation plan is as follows:

	Three Months Ended June 30,				Nine Months Ended June 30,
	2012		2011		2012		2011
	(in thousands)
Cost of revenues	$	147	$	123	$	415	$	353
Engineering, research and development	387		288		1,151		758
Selling, general and administrative	558		515		1,735		1,423
Total stock-based compensation expense	$	1,092	$	926	$	3,301	$	2,534

As of June 30, 2012, there was $6.7 million of unrecognized stock-based compensation expense related to non-vested stock options, restricted stock units, and our ESPP. The weighted average period over which the unearned stock-based compensation is expected to be recognized is approximately 2.25 years. An estimated forfeiture rate of 5.23% has been applied to all unvested options and restricted stock outstanding as of June 30, 2012. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that we grant additional equity awards. 

Stock Options

Activity in stock option awards is as follows:

	Shares		Weighted average exercise price		Weighted average remaining contractual life (in years)	Aggregate intrinsic value
Options outstanding, September 30, 2011	1,699,183		$	29.77	6.37	$	—
Granted	389,182		2.55		—	—
Exercised	(6,047	)	2.54		—	—
Cancelled or expired	(273,770	)	78.25		—	—
Options outstanding, June 30, 2012	1,808,548		16.67		6.84	38,316
Options exercisable, June 30, 2012	992,566		$	27.13	5.37	$	8,884

This intrinsic value represents the excess of the fair market value of our common stock on the date of exercise over the exercise price of such options. The aggregate intrinsic values in the preceding table for the options outstanding represent the total pretax intrinsic value, based on our closing stock price of $2.65, as of June 30, 2012, which would have been received by the option holders had those option holders exercised their in-the-money options as of those dates. There are 0.1 million in-the-money stock options that were exercisable as of June 30, 2012.

The per share fair values of stock options granted in connection with stock incentive plans have been estimated using the following weighted average assumptions:

	Nine Months Ended June 30,
	2012	2011
Expected life (in years)	5.64	6.24
Expected volatility:
Weighted-average	87.0%	85.8%
Range	85.5% - 87.1%	85.7% - 86.5%
Expected dividend	—	—
Risk-free interest rate	1.05% - 1.27%	2.23% - 2.78%

Our determination of the fair value of stock-based payment awards is affected by assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to: our expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise behaviors. The fair value of employee stock options is determined in accordance with ASC 718 and Staff Accounting Bulletin (“SAB”) No. 107, as amended by SAB No. 110, which provides supplemental application guidance based on the views of the SEC, using an option-pricing model; however, that value may not be indicative of the fair value observed in a willing buyer/willing seller market transaction, or actually realized by the employee upon exercise.

Activity for our restricted stock award units is as follows:

	Restricted Stock Units		Weighted Average Grant-Date Fair Value per Share		Weighted average remaining contractual life (in years)	Aggregate intrinsic value
Restricted stock units, September 30, 2011	1,295,979		$	4.67
Awarded	1,258,075		2.57
Released	(708,953	)	3.99
Forfeited	(143,080	)	3.44
Restricted stock units, June 30, 2012	1,702,021		$	3.50	1.33	$	4,510,356

From time-to-time, we retain shares of common stock from employees upon vesting of restricted shares and restricted stock units to cover income tax withholding. The impact of such withholding totaled $0.6 million for the nine months ended June 30, 2012, and was recorded as settlement on restricted stock tax withholding in the accompanying unaudited consolidated statements of stockholders’ deficit.

Employee Stock Purchase Plan

In January 2011, our stockholders approved the 2011 ESPP under which 2.5 million shares of common stock are reserved for issuance. On January 31, 2012, 0.3 million shares were issued at a price per share of $2.59, a 15.0% discount against the share price on that date. The second purchase period began on February 1, 2012 and ends July 31, 2012. The fair value of the ESPP awards are calculated in accordance with ASC 718-50, Employee Share Purchase Plans, under which the fair value of each share granted under the ESPP is equal to the sum of 15% of a share of stock, a call option for 85% of a share of stock, and a put option for 15% of a share of stock. The fair value of the call and put options are determined using the Black-Scholes pricing model. We used the following range of assumptions for both purchase periods: expected useful life of 0.5 years, weighted average expected volatility of 40.4% to 48.4%, a zero dividend rate, and a risk-free interest rate of 0.09% to 0.2%. We recognized approximately $0.2 million and $0.4 million in stock compensation for the three and nine months ended June 30, 2012 related to the ESPP. On July 31, 2012, 0.5 million shares were issued at a price per share of $1.79, a 15.0% discount to the share price on that date.