Income Taxes

12 Months Ended

Nov. 30, 2012

Income Taxes [Abstract]

Income Taxes

5.       Income Taxes

The Company has accumulated net operating losses of $29 million and $34 million for United States federal tax purposes at November 30, 2012 and 2011, respectively, some of which may be limited in their utilization pursuant to Section 382 of the Internal Revenue Code, and which may not be available entirely for use in future years.  These losses expired in fiscal years 2019 though 2031.

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 November 30, 2012 and 2011 were as follows:

	2012		2011
Deferred tax assets, net:
Net operating loss carryforwards	$	9,840,000	$	12,420,000
Allowance for doubtful accounts		10,000		20,000
Stock based compensation		120,000		120,000
Accrued pension		620,000		550,000
Interest		760,000		1,280,000
Other				110,000
		11,350,000		14,500,000
Valuation allowance		11,350,000		14,500,000
Net deferred assets	$	-	$	-

The valuation allowance decreased to $11,350,000 at November 30, 2012 from $14,500,000 at November 30, 2011.

The following is a reconciliation of the tax provisions for the years ended November 30, 2012 and 2011 with the statutory Federal income tax rates:

	Percentage of Pre-Tax Income
	2012			2011
Statutory Federal income tax rate		34.0	%		(34.0	)%
Reduction of tax attributes due to discharge of indebtedness		(34.0	)
Loss generating no tax benefit		-			34.0
Effective tax rate		-			-

Under Section 108(a) of the Internal Revenue Code, the gain of approximately $6,650,000 in fiscal 2012 that is attributable to debt forgiveness and settlement of liabilities is not included in taxable income to the Company as the Company is deemed insolvent for tax purposes.  The Company’s net operating loss carryforwards have been reduced by the amount of non-taxable debt forgiveness.

The Company did not have any material unrecognized tax benefits as of November 30, 2012 and 2011. The Company does not expect the unrecognized tax benefits to significantly increase or decrease within the next twelve months.  The Company recorded no interest and penalties relating to unrecognized tax benefits as of and during the years ended November 30, 2012 and 2011.  The Company is subject to U.S. federal income tax, as well as taxes by various state jurisdictions.  The Company is currently open to audit under the statute of limitations by the federal and state jurisdictions for the years ending November 30, 2009 through 2012.