NOTE 6 – INCOME TAXES.

The Company recorded the following income tax provision (benefit) for the years ended November 30, 2011 and 2010.

As of November 2011 and 2010 the tax effects of temporary differences that give rise to the deferred tax assets and liabilities are as follows:

A partial valuation allowance covering the deferred tax assets of the Company as of November 30, 2011 and 2010, has been provided as the Company does not believe it is more likely than not that all of the future income tax benefits will be realized. The valuation allowance increased by approximately $784,000 and decrease by approximately ($2,426,000) in 2011 and 2010. The 2011 increase was predominantly a result of increased accrued expenses and foreign tax credits. The 2010 decrease was a result of both utilization of net operating carryforwards and releasing the valuation allowance associated with projected income for years ending November 30, 2011 through November 30, 2013. During fiscal 2010, the Company reversed a portion of its valuation allowance for U.S. income taxes of approximately $1,719,000. The reversal of a portion of the deferred tax valuation allowance is based upon the Company's historical operating performance which includes profitability in seven of the eight last quarters leading up to the decision, steadily improving operations and expectations for future taxable income.

The Company has unused net operating losses available for carryforward as of November 30, 2011 of approximately $6,163,000 to offset future federal taxable income. The net operating loss carryforwards expire during 2022 through 2027. The Tax Reform Act of 1986 contains provisions that limit the utilization of net operating losses if there has been an "ownership change". Such an "ownership change" as described in Section 382 of the Internal Revenue code may limit the Company's utilization of its net operating loss carryforwards. Management has completed an internal analysis of potential ownership changes and has concluded that no ownership changes have occurred through November 30, 2011 which would potentially limit the utilization of the net operating losses.

A reconciliation of the income tax provision with the amount of tax computed by applying the federal statutory rate to pretax income follows:

The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of November 30, 2011 and 2010, the Company had no provisions for interest or penalties related to uncertain tax positions.

The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various state jurisdictions. The table below summarizes the open tax years and ongoing tax examinations in major jurisdictions as of November 30, 2011: