The provision for income tax expense consists of the following:

The state income tax provision decreased to $75,000 from $134,000 for the same period in fiscal 2011 as a result of generating tax losses during fiscal 2012.

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, 2012, the Company had federal net operating loss carryforwards of approximately $100.4 million, which includes stock-based compensation deductions of approximately $22.8 million and tax credit carryforwards of approximately $1.3 million. The federal net operating losses and tax credits expire in years beginning in 2021. At January 31, 2012, the Company had state net operating loss carryforwards of approximately $107.9 million which expire in years beginning in 2014. In addition, the Company had state tax credit carryforwards of approximately $2.8 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. We have previously experienced "ownership changes" under section 382 of the Code and comparable state tax laws. We estimate that approximately $1.7 million of our federal and approximately $2.1 million of our state net operating losses will expire unused due to the limitation in Section 382 of the Code.

During the fiscal year ended January 31, 2012 the Company's valuation allowance increased by approximately $2.5 million. At January 31, 2011 and 2012, 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, 2012, unrecognized tax benefits of approximately $1.4 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 have such interest, penalties or tax benefits during the fiscal year ended January 31, 2012.

The Company files income tax returns in the United States, California and other states. Tax years 2000 to 2011 remain subject to examination for U.S. federal and state 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 federal or state jurisdictions.