Note 9 - Legal Proceedings

3 Months Ended

Jun. 30, 2011

Legal Matters and Contingencies [Text Block]

NOTE 9: LEGAL PROCEEDINGS

There are no material legal proceedings known or threatened against the Company, except:

The lawsuit instituted by the Company on January 8, 2008 in England against Turbotec Products Plc was concluded in February, 2010. A judgment in favor of the Company on one count and against it on two counts was rendered on May 10th, 2010. The net effect of the London judgment held that the Company was required to reimburse the PLC for 85% of the PLC’s legal expenses which was negotiated to a sum of £560,000, and that amount has been paid; £350,000 was paid in May 2010, and £210,000 was paid in July 2011.

Turbotec Products, Inc. commenced a lawsuit against Thermodynetics on February 27th, 2008 in the Connecticut Superior Court, Judicial District of Hartford. The parties settled the lawsuit and on January 10th, 2011 mutual releases were exchanged, and the lawsuit was dismissed without any financial obligation owed to either party.

The Company's bank initiated and served two separate lawsuits on June 28th, 2010 against the Company in the Connecticut Superior Court, Judicial District of Hartford, alleging defaults of a line of credit and certain mortgages and seeking recovery through foreclosure of the liens against the two commercial buildings. Negative outcomes in either of such proceedings will have a material adverse effect upon the Company. At June 30th, 2011, the Company was current on both primary mortgages and was current on its interest payments against the line of credit which had matured in 2009. The default initially was against the line of credit which has not been repaid and the bank has claimed a cross-default against the mortgages. The Company believes there is material equity in the buildings exceeding the value of all of the bank debt. The current balance due under the line of credit and mortgages equals approximately $2.25 million at June 30, 2011; the Bank is claiming such balance plus costs and legal expenses of the proceeding. In the event the bank is successful in its foreclosure proceedings and a qualified buyer for the properties is not secured, the loss to the Company could exceed the amounts due under the line of credit and mortgages. However, in the event of a strict foreclosure, under Connecticut foreclosure law, a court would apply a fair market value to the properties and buildings based upon a then to be appraised value as of the date title vested in the bank; therefore, the likely risk of loss to the Company would be the loss of the land and buildings but not further financial deficiency claims. Both properties are currently listed for sale with a commercial real estate broker, and management would also consider any long-term lease opportunities. A trial date is set for June 12, 2012.