6. Income Taxes

        The provision for income tax expense consists of the following:

        The income tax provision decreased by $70,000 from $75,000 to $5,000 as a result of changes in state tax statutes which resulted in lower tax obligations in some states.

        The following table presents a reconciliation of the statutory federal rate and the Company's effective tax rate for the periods presented.

        The major components of deferred tax assets and liabilities were as follows:

        At January 31, 2013, the Company had federal net operating loss carryforwards of approximately $180.8 million and tax credit carryforwards of approximately $2.5 million. If realized, $92.0 million of the net operating loss carryforwards will be recognized as a benefit through additional paid in capital. The federal net operating losses and tax credits expire in years beginning in 2021. At January 31, 2013, the Company had state net operating loss carryforwards of approximately $203.8 million which expire in years beginning in 2014. In addition, the Company had state tax credit carryforwards of approximately $4.3 million that do not expire.

        Under Section 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, if a corporation undergoes an "ownership change," the corporation's ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes, such as research tax credits, to offset its post-change income may be limited. In general, an "ownership change" will occur if there is a cumulative change in our ownership by "5-percent shareholders" that exceeds 50 percentage points over a rolling three-year period. Similar rules may apply under state tax laws. Utilization of the Company's net operating loss and tax credit carryforwards may be subject to annual limitations due to ownership changes. Such annual limitations could result in the expiration of the Company's net operating loss and tax credit carryforwards before they are utilized.

        During the fiscal year ended January 31, 2013 the Company's valuation allowance increased by approximately $11.7 million. At January 31, 2012 and 2013, the Company maintained a full valuation allowance on its net deferred tax assets. The valuation allowance was determined in accordance with the provisions of ASC 740, Accounting for Income Taxes, which requires an assessment of both positive and negative evidence when determining whether it is more likely than not that deferred tax assets are recoverable. Such assessment is required on a jurisdiction by jurisdiction basis. The Company's history of cumulative losses, along with expected future U.S. losses required that a full valuation allowance be recorded against all net deferred tax assets. The Company intends to maintain a full valuation allowance on net deferred tax assets until sufficient positive evidence exists to support reversal of the valuation allowance.

        At January 31, 2013, unrecognized tax benefits of approximately $2.6 million, if recognized, would not affect the Company's effective tax rate as the tax benefit would increase a deferred tax asset which is currently offset with a full valuation allowance. The Company does not anticipate that the amount of existing unrecognized tax benefit will significantly increase or decrease within the next 12 months. Accrued interest and penalties related to unrecognized tax benefits are recorded as income tax expenses. The Company did not recognize any interest, penalties or tax benefits during the fiscal year ended January 31, 2013.

        The Company files income tax returns in the United States, California, other states and international jurisdictions. Tax years 2000 to 2012 remain subject to examination for U.S. federal, state and international purposes. All net operating losses and tax credits generated to date are subject to adjustment for U.S. federal and state purposes. The Company is not currently under examination in any federal, state or international jurisdictions.