12.

Income Taxes

Components of the income tax provision are as follows for the fiscal years ended September 30, 2013, 2012 and 2011:


	2013			2012			2011
Current:
State	$	3,200		$	3,200		$	3,200

Deferred:
Federal		(23,055,582	)		(15,486,906	)		(18,297,582	)
State		(4,938,691	)		(2,731,249	)		(2,020,800	)

		(27,994,273	)		(18,218,155	)		(20,318,382	)

Increase in deferred income tax asset valuation allowance		27,994,273			18,218,155			20,318,382

Total income tax provision	$	3,200		$	3,200		$	3,200

Deferred income taxes reflect the income tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. Significant components of the Company’s net deferred income tax balance are as follows:


	September 30,
	2013			2012			2011
Net operating loss carryforwards	$	155,960,858		$	135,430,308		$	117,027,433
Deferred revenue		504,143			1,570,370			2,960,454
Research credit carryforwards		9,185,508			11,202,848			11,560,603
Capitalized license fees and patents		10,176,119			2,017,029			2,342,589
Capitalized research and development costs		29,705			99,671			263,942
Share-based compensation and options		8,452,457			6,979,532			5,586,697
Foreign tax credits		—			—			595,912
Other		3,404,764			2,579,478			1,480,613

Deferred income tax assets		187,713,554			159,879,236			141,818,243

Deferred tax liabilities:
Other		(162,824	)		(322,779	)		(479,941	)

Deferred tax liabilities		(162,824	)		(322,779	)		(479,941	)

Less valuation allowance for net deferred income tax assets		(187,550,730	)		(159,556,457	)		(141,338,302	)

Net deferred tax assets / (liabilities)	$	—		$	—		$	—

The Company has provided a full valuation allowance against the net deferred income tax assets recorded as of September 30, 2013, 2012 and 2011 as the Company concluded that they are unlikely to be realized. As of September 30, 2013 the Company had federal and state net operating loss carryforwards of $407.4 million and $356.1 million, respectively. As of September 30, 2013 the Company had federal and California research and development credits of $7.8 million and $6.8 million, respectively. The net operating loss and research credit carryforwards will expire on various dates through 2029, unless previously utilized. The Company also has no foreign tax credit carryforwards at September 30, 2013. In the event of certain ownership changes, the Tax Reform Act of 1986 imposes certain restrictions on the amount of net operating loss and credit carryforwards that the Company may use in any year.

Pursuant to Internal Revenue Code (“IRC”) Sections 382 and 383, annual use of the Company’s net operating loss and research and development credit carryforwards may be limited in the event of a cumulative change in ownership of more than 50% within a three-year period. The Company has completed an analysis under IRC Sections 382 and 383 through September 30, 2013, and has determined that it has not experienced an ownership change as defined by Section 382. The Company continues to monitor changes in our ownership as any future ownership changes may significantly reduce the utilization of the net operating loss carryforwards and research tax credits before they expire.

A reconciliation of the federal statutory income tax rate and the effective income tax rate is as follows for the fiscal years ended September 30:


	2013			2012			2011
Federal statutory rate		(34	)%		(34	)%		(34	)%
Increase in deferred income tax asset valuation allowance		37			31			34
State income taxes, net of federal effect		(5	)		(5	)		(4	)
Research and development credits		3			1			0
Expired net operating loss and other credits		—			6			4
Other		(1	)		1			0

Effective income tax rate		0	%		0	%		0	%