Contingencies

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Contingencies

Note 5 - Contingencies

Pending Litigation

On February 12, 2010, the Company filed an adversary action in the Bankruptcy Court against the former holder of a senior secured note payable seeking to avoid certain ownership interests assigned to the Company's previous lender in connection with the Term Credit Agreement and amendments thereto and seeking other damages. On March 18, 2010, the Company's previous lender filed a motion with the Court to dismiss the complaint. On October 21, 2010, the Court issued an order on the Motion to Dismiss dismissing three of the nine claims made in the adversary action. The Company is actively pursuing the remaining claims. The Company is unable to predict a likely outcome or estimate the possible benefit should the Company prevail in the litigation. In connection with the sale of the Company's oil and gas properties in March 2011, the purchaser has agreed to reimburse up to $250,000 of legal expenses incurred in connection with this adversary action. 

Threatened Litigation

In a letter dated February 18, 2009 sent to each of the Company's Directors, attorneys representing a group of persons who purchased approximately $1,800,000 of securities (in the aggregate) in the Company's private placement offering commenced in late 2006, alleged that securities laws were violated in that offering. In April 2009, the Company entered into tolling agreements with the purchasers to toll the statutes of limitations applicable to any claims related to the private placement. The Company's Board of Directors directed the Special Committee to investigate these allegations. The Company denies the allegations and believes they are without merit. The Company cannot predict the likelihood of a lawsuit being filed, its possible outcome, or estimate a range of possible losses, if any, that could result in the event of an adverse verdict in any such lawsuit. Any suit against the Company is stayed by the Chapter 11 case, and, insofar as these claims are asserted against the Company, they are subject to the claim process imposed by the Bankruptcy Code and the possible subordination under Section 510(b) of the Bankruptcy Code. The purchasers have filed Proofs of Claim with the Bankruptcy Court in the amount of $1,776,050 plus ancillary amounts purported to be damages attributable to the alleged securities violations. On January 24, 2011, the Company filed objections to these claims seeking disallowance and in June 2011, the Bankruptcy Court rendered a decision that these claims are subordinated to unsecured claims. The merits of the claims otherwise have not yet been addressed by the Bankruptcy Court and the matter therefore remains open and subject to appeal.