H1b transfer possible?

I had H1b from my last employer, it won't expire until end of 2011.
However, I have been unemployed for almost 10 months now.

I am talking to this company about a job. I told them my H1b still have a couple of years. I asked them if they can transfer. They said my H1 is out of status and transfer can't happen.

Is this so? Do i have to have new H1b application to work now?