9. INCOME TAXES

A reconciliation of the Company's statutory tax rate to the effective rate for the years ended December 31, 2011 and 2010 is as follows:

	2011			2010
Federal statutory rate		34.0	%		34.0	%
State taxes, net of federal tax benefit		4.6			5.4
Recapture of alternative minimum tax		–			–
Valuation allowance		(38.6	)		(39.4	)

Effective tax rate		–	%		–	%

The components of the Company's deferred tax asset as of December 31, 2011 and 2010 are as follows:

	December 31,
In thousands	2011			2010

Net operating loss carry forwards	$	40,104		$	31,341
Compensation expense related to employee stock options		2,285			1,917
Subtotal		42,389			33,258
Valuation allowance		(42,389	)		(33,258	)
Total deferred tax asset	$	-		$	-

The evaluation of the realizability of such deferred tax assets in future periods is made based upon a variety of factors that affect the Company's ability to generate future taxable income, such as intent and ability to sell assets and historical and projected operating performance. At this time, the Company has established a valuation reserve for all of its deferred tax assets. Such tax assets are available to be recognized and benefit future periods.

During 2011 the Company performed analyses to determine if there were changes in ownership, as defined by Section 382 of the Internal Revenue Code that would limit its ability to utilize certain net operating loss and tax credit carryforwards. The Company determined that it experienced an ownership change, as defined by Section 382, in connection with its registered direct and private placement offerings on July 25, 2011. As a result, the utilization of the Company's federal tax net operating loss carryforwards generated prior to the ownership change is limited. As of December 31, 2011, the Company has net operating loss carryforwards for U.S. federal and state tax purposes of approximately $103.8 million, before excluding net operating losses that have been limited as a result of Section 382 limitations. The annual limitation due to Section 382 for net operating loss carry forward utilization is approximately $4.9 million.The utilization of these net operating loss carryforwards may be further limited if the Company experiences future ownership changes as defined in Section 382 of the Internal Revenue Code.

Approximate Amount Of Unused Operating Loss Carry Forwards ($000s)		Expiration During Year Ended
$	5,003		2022
	2,292		2023
	15,655		2024
	8,174		2025
	7,367		2026
	10,716		2028
	14,300		2029
	18,045		2030
	22,292		2031
$	103,844