Item 3. Legal Proceedings. There are no material legal proceedings known or threatened against the Company, except: (a) 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 the PLC has claimed approximate £795,000; the Company is contesting such amount. On May 24th, 2010 in accordance with the judgment, the Company paid £350,000 to the PLC on account of their costs. The Company could ultimately be responsible for up to an additional £325,000 of legal costs claimed by the PLC, although the Company believes the amount may be substantially less. (b) Turbotec Products, Inc. commenced a lawsuit against Thermodynetics on February 27th, 2008 in the Connecticut Superior Court, Judicial District of Hartford, alleging that Thermodynetics breached two commercial leases, and that Thermodynetics improperly withdrew funds from a sinking fund established under the leases, and for fraudulent inducement, fraudulent misrepresentation, and violation of the Connecticut Unfair Trade Practices Act. The parties settled the lawsuit and on January 10th, 2011 mutual releases were exchanged between Thermodynetics and Turbotec, and the lawsuit was dismissed without any financial obligation owed to either party. An outcome of the settlement was that Turbotec extended its leasehold interest in the Day Hill facility through December 31st, 2011. Thermodynetics, Inc. Annual Report on Form 10-K Page 5 (c) 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 March 31st, 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 $2.4 million; 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.