Income Taxes

12 Months Ended

Sep. 30, 2011

Income Tax Disclosure [Abstract]

Income Taxes

9.    Income Taxes

During the year ended September 30, 2009, the Company performed a review on the research and development activities that occurred in the state of Connecticut that support the Connecticut research and development credits and refunds. The results of that study decreased income tax receivable and the corresponding reserve relating to an anticipated tax refund from the state of Connecticut for research and development activities. For the year-ended September 30, 2009, this resulted in a 1% decrease to the Company’s effective tax rate. The reserve does not include interest or penalties based on the nature of the liability. The Company plans to treat any future interest or penalties as operating expense.

The following table summarized the activity related to the Company’s liabilities for uncertain tax positions:

	Year Ended September 30,
	2009			2010			2011
Balance, beginning of year	$	988		$	188		$	86
Increase related to current year tax position		6			5			—
Increase related to prior year’s tax position		107			—			—
Decrease related to prior year’s tax position		(913	)		(107	)		(11	)
Balance, at end of year	$	188		$	86		$	75

The Company files U.S. federal and state tax returns and has determined that its major tax jurisdictions are the United States and Connecticut. The tax years through 2010 remain open due to net operating loss carryovers and are subject to examination by the appropriate governmental agencies in the United States and Connecticut.

The provision (benefit) for income taxes is as follows:

	Year Ended September 30,
	2009		2010			2011
Current expense
Federal	$	—	$	—		$	—
State		337		(104	)		41
Actual tax provision (benefit)	$	337	$	(104	)	$	41

As of September 30, 2011, the Company had net operating loss carryforwards of approximately $50,970 (net of Section 382 limitation discussed below) for U.S. federal tax purposes and $106,148 for state tax purposes. These loss carryforwards expire between 2024 and 2031. To the extent these net operating loss carryforwards are available, the Company intends to use them to reduce the corporate income tax liability associated with its operations. Section 382 of the U.S. Internal Revenue Code generally imposes an annual limitation on the amount of net operating loss carryforwards that might be used to offset taxable income when a corporation has undergone significant changes in stock ownership. As of September 30, 2010, the Company performed a preliminary Section 382 analysis and believed it created an ownership change. The Company updated the Section 382 analysis, performed in fiscal year 2010, to incorporate the registered direct offering that it completed in May 2011 and determined that an ownership change under Section 382 occurred on May 12, 2011. The Company believes that approximately $55,890 of the $106,860 federal losses (prior to the Section 382 limitation) will expire unused due to Section 382 limitations. The maximum annual limitation under Section 382 is approximately $2,496 for twenty (20) years. The limitation could be further restricted if ownership changes occur in future years. To the extent the Company’s use of net operating loss carryforwards is limited, future income could be subject to corporate income tax earlier than it would if the Company was able to use net operating loss carryforwards, which could result in decreased net income. In addition to the NOL limitation, the 382 limitation also limited approximately $1,815 of federal research and development credit carryovers.

The Company also has state research and development credit carryovers of approximately $477, which expire commencing in fiscal 2022.

The major components of deferred tax assets and valuation allowances and deferred tax liabilities at September 30, 2011 and 2011 are as follows:

	September 30,
	2010			2011
Deferred Tax Assets
Net operating losses	$	46,917		$	23,699
Capitalized expense		—			16,936
Research and development credits		2,800			477
Depreciation of fixed assets		166			303
Other		176			765
Total deferred tax asset		50,059			42,180
Valuation Allowance		(50,059	)		(42,180	)
Net Deferred Tax Assets	$	—		$	—

As the Company has not yet achieved profitable operation, management does not believe that it is more likely than not that the tax benefits as of September 30, 2011 will be realized and therefore has recorded a valuation allowance against its deferred tax assets.

The Company files its tax returns on a fiscal year basis. For the years ended September 30, 2009, 2010 and 2011, the Company paid only state taxes.

The following reconciles the amount of tax expense at the federal statutory rate to the tax provision (benefit) in operations:

	Year Ended September 30,
	2009			2010			2011
Federal statutory rate		34.00	%		34.00	%		34.00	%
Federal taxes at statutory rate	$	(14,597	)	$	(13,054	)	$	(3,587	)
Tax expense on permanent differences(a)		1,741			2,296			(2,631	)
Tax benefit on research and business credits		(325	)		(425	)		—
State taxes, net of federal tax effect		43			23			19
State benefit, net operating loss		(1,249	)		(2,990	)		(163	)
Valuation allowance increase(b)		14,432			14,156			6,382
Connecticut research and development refund		(40	)		(30	)		—
Reserve for uncertain tax positions		6			4			—
Other		326			(84	)		21
Actual tax provision (benefits)	$	337		$	(104	)	$	41

(a)   Permanent differences were derived from share based compensation and adjustments to common stock warrant liability.

(b)   Net of the Section 382 Adjustment.