Discontinued Operations

3 Months Ended

Jun. 30, 2011

Notes to Financial Statements

Discontinued Operations

As previously reported, on May 14, 2010, the Company had acquired 100% of the common stock of Triple C Transport, Inc. (“Triple C”).  As was our practice with previous acquisitions, the former owners continued to manage the day to day operations of Triple C and it was leasing approximately ninety-one power units and ninety-nine trailers from companies owned by the former owners for payments equal to the payment those companies make on its financing agreements for that equipment, which was approximately $300,000 a month.  Triple C headquarters was leased from another company owned by the former owners for approximately $5,250 per month.  The acquisition agreement provided that one of the former owners would serve on the Company’s Board of Directors and he would be employed as the general manager of Triple C for three years.

During the latter part of October, 2010, the former owners of Triple C notified the Company in writing that entities controlled by them and receiving lease payments from Triple C were having difficulty servicing the debt of the related entities.  Two of those entities White Farms Trucking, Inc. (“WFT”) and Craig Carrier Corporation, LLC (“CCC”) ultimately filed Chapter 11 bankruptcy in the United States Bankruptcy Court for the district of Nebraska, which were filed on December 21, 2010 and have been assigned case numbers 10-43797 and 10-43798.

During November, 2010 both the former owners resigned as officers and directors of Triple C, but one of the former owners continued to serve on our (IFC) Board of Directors through April, 2011.  Triple C installed new management to operate the business on a day to day basis and in an effort to insure Triple C’s continued operations with minimum disruption from potential bankruptcy related issues, moved substantially all of the Triple C ongoing operations away from the facility it leased from one of the related entities.  The physical move occurred in Mid-January 2011.  In order to preserve liquidity, Triple C had temporarily suspended lease payments for the equipment leased by Triple C from WFT/CCC.  Under the terms of the May 14, 2010 “Stock Purchase Agreement” IFC executed a corporate guaranty for all lease and other payments arising from the leases between WFT/CCC and Triple C.

On May 2, 2011, we filed a complaint against Craig White and Vonnie White in the District Court for Douglas County, Nebraska and served notice on the defendants pursuant to the Stock Purchase Agreement under which we acquired Triple C Transport, Inc. from the defendants on or about May 14, 2010.  In the complaint, we ask the court to rescind the Stock Purchase Agreement, alleging multiple, material breaches of representations and warranties which individually and in the aggregate constitute fraud upon us.  We are also seeking damages in unspecified amounts.  We intend to pursue this litigation aggressively.  Because of actions taken by the defendants subsequent to closing of our acquisition, undisclosed liabilities of Triple C Transport, breaches of the defendants’ representations and warranties, and the bankruptcies of entities they control and which were Triple C Transport’s equipment lessors, we believe that rescission will not have a materially negative impact on our financial performance going forward; even though we will not enjoy the benefits of the acquisition which we expected at the time of the transaction but which do not seem now available in fiscal year 2012, in view of the fact that Triple C Transport has lost its licenses to operate based on actions by Mr. and Mrs. White and other entities they control both before and after the closing of the transaction.  

In August 2011, the Company estimated a loss in the amount of $1,893,269 to be realized upon completion of the rescission of this business unit, as well as an estimated operating loss of $420,756 to be incurred during the phase-out period.  For the period May 14, 2010 through March 31, 2011 the Company incurred actual operating losses associated with this discontinued unit of $1,529,033.

Summarized operating resultes for discontinued operations is as follows:
					Quarter			May 14, 2010			May 14, 2010
					Ending			through June 30,			through March 31,
					June 30, 2011			2010			2011
Revenue					$	322,664		$	1,925,199		$	13,674,634
Operating Expenses						743,420			1,971,903			14,968,828
Operating Income (Loss)						(420,756	)		(46,704	)		(1,294,194	)
Other Income (Expense)						-			49,052			234,839
Loss from operations						(420,756	)		2,348			(1,529,033	)
Income tax benefit						-			-			-
Gain (loss) to be recognized from discontinued operations, net of tax					$	(420,756	)	$	2,348		$	(1,529,033	)
The gain (loss) from discontinued operations above do not include any income tax effect as the Company was not in a taxable position due
to its continued losses and a full valuation allowance
Summary of assets and liabilities of discontinued operations is as follows:
		June 30,			June 30,			March 31,			May 14,
		2011			2010			2011			2010
	Accounts receivable	$	-		$	91,588		$	179,000		$	120,172
	Other Assets		28,469			39,185			57,279			9,283
	Intangible assets		-			-			-			466,424
	Total assets from discontinued operations	$	28,469		$	130,773		$	236,279		$	595,879
	Accrued liabilities and other current liabilities	$	1,893,269		$	130,773		$	1,765,313		$	145,879
			-			-			-			-
			1,893,269			130,773			1,765,313			145,879
			-			-			-			-
	Total liabilities associated with discontinued operations	$	1,893,269		$	130,773		$	1,765,313		$	145,879
		$	(1,864,800	)	$	-		$	(1,529,034	)	$	450,000