At October 31, 2001, the Company had available for the reduction of future years’ federal taxable income and income taxes, net operating loss carryforwards of approximately $195,078,000, expiring from the year ended October 31, 2004 through 2021, along with research and development and investment tax credits of approximately $7,442,000, expiring from the year ended October 31, 2001 through 2021. Since the Company has incurred only losses since inception and due to the degree of uncertainty with respect to future profitability, the Company believes at this time that it is more likely than not that sufficient taxable income will not be earned to allow for realization of the tax loss and credit carryforwards and other deferred tax assets. Accordingly, the tax benefit of these items has been fully reserved.

     Deferred income taxes reflect the net 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 deferred tax assets and liabilities as of October 31, 2001 and 2000 were as follows:

				2001				2000
				In thousands
Deferred tax assets:
	Net operating loss carryforward			$	75,522			$	65,586
	Capitalized research and development				39,644				31,515
	Accruals and reserves				2,368				3,339
	Tax credit carryforwards				7,442				6,408
		Total deferred tax assets			124,976				106,848
Deferred tax liabilities:
	Depreciation				2,169				2,035
		Total deferred tax liabilities			2,169				2,035
Net deferred tax assets					122,807				104,813
Valuation allowance for deferred tax assets					(122,807	)			(104,813	)
Net deferred tax assets				$	—			$	—

     In 2001, the valuation allowance increased by $17,994,000 due primarily to the increase in net operating losses, capitalized research and development costs, and research and development tax credits.