RECEIVABLES PAYABLES RELATED PARTIES

9 Months Ended

Sep. 30, 2012

RECEIVABLES PAYABLES RELATED PARTIES

RECEIVABLES PAYABLES RELATED PARTIES

NOTE E – RECEIVABLES – PAYABLES – RELATED PARTIES

Prime Income Asset Management, Inc (“PIAMI”) is a real estate management company that also invests in real estate for its own account. PIAMI is indirectly owned by a private trust. The Company had various involvement with PIAMI and its affiliates over the past 7 years and therefore treated PIAMI as a related party.

Beginning in 2006 the Company made loans to PIAMI and its affiliates at interest rates higher than the Company believes it could have obtained elsewhere. By May of 2008 the loans plus accrued interest amounted to approximately $21 million. As of the end of 2011 the loans (which were consolidated into a single loan in 2009) plus accrued interest amounted to approximately $10.3 million. In the fourth quarter of 2011 the Company determined that the financial condition of PIAMI had deteriorated and there could be no assurance that the amount owed would or could be collected. The company recorded a reserve of $10.3 million for the PIAMI loan and reduced the value of the receivable to zero.

Beginning in 2011 the Company conducted business with Pillar Income Asset Management (“Pillar”) whereby Pillar would provide the Company with services including processing payroll, acquiring insurance etc. The Company believes that by purchasing these services through certain large entities it can get lower costs and better service. In addition Pillar loaned the Company $225,000 which was used to settle a lawsuit.

While separate companies both PIAMI and Pillar are both owned by Reality Advisors, Inc. (“RAI”). During 2011 and 2012 the Company incurred  obligations to Pillar totaling approximately $1.7 million. In a joint agreement among Pillar, PIAMI and the Company Pillar agreed to relieve the Company of its obligation to pay the $1.7 million and the Company agreed to reduce the amount owed by Prime by a like amount. In the third quarter of 2012 the Company recorded a $1.7 million gain on the transaction.

Further in a separate agreement among RAI, PIAMI and the Company, RAI has agreed to be obligated to the Company for $1,250,000 and the Company has agreed to further reduce its receivable from PIAMI by a like amount to the extent such receivable is ultimately paid. While the company believes the likelihood of collecting an obligation from RAI is greater than from PIAMI the Company will not record a recover of the bad debt allowance until the receivable from RAI is collected. The Company will continue to attempt to collect the balance of the receivable due from PIAMI however there is no assurance that further collections will occur.