18.

Income Taxes

The Company’s income tax benefit totaled $.3 million for the three months ended May 31, 2011, compared to income tax expense of $.1 million for the three months ended May 31, 2010. For the six months ended May 31, 2011 and 2010, the Company’s income tax expense totaled $.1 million and $.3 million, respectively. Due to the effects of its deferred tax asset valuation allowances, carrybacks of its net operating losses (“NOLs”), and changes in its unrecognized tax benefits, the Company’s effective tax rates for the three-month and six-month periods ended May 31, 2011 and 2010 are not meaningful items as the Company’s income tax amounts are not directly correlated to the amount of its pretax losses for those periods.

In accordance with Accounting Standards Codification Topic No. 740, “Income Taxes” (“ASC 740”), the Company evaluates its deferred tax assets quarterly to determine if valuation allowances are required. ASC 740 requires that companies assess whether valuation allowances should be established based on the consideration of all available evidence using a “more likely than not” standard. During the three months ended May 31, 2011, the Company recorded a valuation allowance of $25.7 million against net deferred tax assets generated from the loss for the period. During the three months ended May 31, 2010, the Company recorded a valuation allowance of $12.8 million against net deferred tax assets. For the six months ended May 31, 2011 and 2010, the Company recorded valuation allowances of $70.8 million and $34.0 million, respectively, against the net deferred taxes generated from losses for those periods. The Company’s net deferred tax assets totaled $1.1 million at both May 31, 2011 and November 30, 2010. The deferred tax asset valuation allowance increased to $841.9 million at May 31, 2011 from $771.1 million at November 30, 2010. This increase reflected the impact of the $70.8 million valuation allowance recorded during the six months ended May 31, 2011.

During the three months ended May 31, 2011, the Company had a $.3 million net reduction to its total gross unrecognized tax benefits as a result of the current status of federal and state audits. During the six months ended May 31, 2011, net reductions to the Company’s total gross unrecognized tax benefits were $.3 million. The total amount of unrecognized tax benefits, including interest and penalties, was $6.6 million as of May 31, 2011. The Company anticipates that total unrecognized tax benefits will decrease by approximately $2.0 million during the 12 months from this reporting date due to various state filings associated with the resolution of the federal audit.

The benefits of the Company’s NOLs, built-in losses and tax credits would be reduced or potentially eliminated if the Company experienced an “ownership change” under Internal Revenue Code Section 382 (“Section 382”). Based on the Company’s analysis performed as of May 31, 2011, the Company does not believe it has experienced an ownership change as defined by Section 382, and, therefore, the NOLs, built-in losses and tax credits the Company has generated should not be subject to a Section 382 limitation as of this reporting date.