DISCONTINUED OPERATIONS

9 Months Ended

Jan. 31, 2013

Discontinued Operations

DISCONTINUED OPERATIONS

NOTE 11 - DISCONTINUED OPERATIONS

St. Louis and Sarasota Operations Common Stock Sales

Effective September 1, 2011, the Company entered into a Securities Purchase Agreement and Amendment No. 1 to the Escrow Agreement with Multiband, Inc. (Multiband) traded under the NASDAQ symbol MBND, for the acquisition by Multiband of the common stock of the Company’s former wholly-owned subsidiaries, the St. Louis and Sarasota Operations, for $2,000,000 in cash. The $2,000,000 in proceeds was used to reduce the outstanding borrowings under a previous loan agreement with Bank of America, N.A.

Hartford and Lakewood Operations Asset Sales

On July 25, 2012, the Company and the Hartford and Lakewood Operations entered into an asset purchase agreement (the Asset Purchase Agreement), pursuant to which the Hartford and Lakewood Operations sold substantially all of their assets to two newly-created subsidiaries of Kavveri Telecom Products Limited (Kavveri) for a purchase price of $5.5 million in cash, subject to adjustment, and the assumption of their various liabilities. At closing, the Company received $4.9 million in cash, with the remaining $600,000 of the purchase price to be placed into escrow pursuant to the Asset Purchase Agreement. The Company used the proceeds from this sale to repay the full amount outstanding under the Credit Agreement of $4,022,320 as of July 25, 2012. The difference of $877,680 was deposited in its operating cash account.

Kavveri agreed to place $350,000 of the purchase price into escrow in the future pending assignment of certain contracts post-closing, with the Company receiving those funds upon successful assignment of the contracts. The remaining $250,000 is to be escrowed in the future for purposes of satisfying certain adjustments to the purchase price based on a final net asset valuation to be completed after closing as well as repurchase obligations of certain delinquent accounts receivable. No later than three days after the final determination of the net asset valuation, the purchasers are required to deposit the $600,000 into escrow.

To date, the Company has not reached agreement with Kavveri with regard to resolving the net asset valuation. On January 28, 2013, Kavveri submitted a revised aggregate claim for indemnification by the Company of $1,511,560 with regard to (1) net asset valuation claim owed of $1,160,499, which includes accounts receivable deemed uncollectible of $519,000 related to a project that was completed by the Company’s former Hartford Operations and accepted by the customer on or prior to the Closing Date; and (2) delinquent account receivables to be repurchased of $813,331.

On February 27, 2013, the Company notified Kavveri that it disputed these claims. Among other things, the Company disputes the amount of the delinquent receivables, and believes that after consideration of reserves for uncollectible accounts and other offsets previously considered in its calculation of the net asset valuation, the total amount of accounts receivable deemed uncollectible for repurchase to be $36,436. However, the Company contends that Kavveri missed the deadline to notify the Company regarding the repurchase of delinquent receivables pursuant to the terms of the Asset Purchase Agreement regarding timing for notification to the Company, which would eliminate any repurchase payment owed by the Company to Kavveri. The Company also believes that the $519,000 of accounts receivable claimed for indemnification by Kavveri is without merit. Finally, the Company also disputes the net asset valuation claim, and believes Kavveri owes the Company $58,058, following its evaluation of the uncollectible accounts receivable. With regard to the net asset valuation claim, if the parties disagree, and if they are unable to come to an agreement, the matter will be submitted to one or more independent, nationally-recognized accounting firms for final determination.

The Company has reported the financial activity of these four operations as discontinued operations for all periods presented. The Company has reflected the estimated changes in the in the gain (loss) from the disposal of the Hartford and Lakewood Operations in the three and nine months ended January 31, 2013. A summary of the operating results for the discontinued operations is as follows:

	Three Months Ended						Nine Months Ended
	January 31,						January 31,
	2013			2012			2013			2012
REVENUE	$	-		$	7,369,878		$	4,901,501		$	21,384,280
COSTS AND EXPENSES:
Cost of revenue		-			5,195,158			4,088,400			15,945,789
Selling, general and administrative expenses		-			1,686,762			1,291,164			5,235,987
Depreciation and amortization		-			124,822			101,750			424,330
		-			7,006,742			5,481,314			21,606,106
OPERATING INCOME (LOSS) FROM DISCONTINUED OPERATIONS		-			363,136			(579,813	)		(221,826	)
Interest expense		-			8,699			5,315			14,075
Income (loss) from discontinued operations before income tax (benefit) provision		-			354,437			(585,128	)		(235,901	)
Income tax (benefit) provision		(31,913	)		1,954,051			110,518			1,837,728
Income (loss) from discontinued operations, net of tax		31,913			(1,599,614	)		(695,646	)		(2,073,629	)
Gain (loss) from disposal		(12,880	)		-			1,826,539			(1,027,637	)
TOTAL INCOME (LOSS) FROM DISCONTINUED OPERATIONS	$	19,033		$	(1,599,614	)	$	1,130,893		$	(3,101,266	)

The Company incurred approximately $56,000 of expenses directly associated with the asset sales of the Hartford and Lakewood Operations.

There were no assets or liabilities included in the condensed consolidated balance sheet for the Hartford and Lakewood Operations at January 31, 2013. The major classes of assets and liabilities included in the condensed consolidated balance sheets at April 30, 2012 for the Hartford and Lakewood Operations as discontinued operations were as follows:

	April 30, 2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	2,432
Accounts receivable, net of allowance of $134,929 at April 30, 2012		5,837,341
Costs and estimated earnings in excess of billings on uncompleted contracts		183,760
Inventory		1,416,773
Prepaid expenses and other current assets		82,971
Prepaid income taxes		47,920
Total current assets		7,571,197
PROPERTY AND EQUIPMENT, net		1,013,377
OTHER ASSETS		51,478
Total assets		8,636,052
LIABILITIES AND EQUITY
CURRENT LIABILITIES:
Current portion of loans payable		99,002
Income taxes payable		2,000
Accounts payable and accrued expenses		4,754,099
Billings in excess of costs and estimated earnings on uncompleted contracts		33,103
Deferred revenue		498,934
Total current liabilities		5,387,138
Loans payable, net of current portion		172,222
Total liabilities		5,559,360
Total net assets	$	3,076,692