8. Subordinated Convertible Debentures Payable

12 Months Ended

Dec. 31, 2014

Convertible Subordinated Debt [Abstract]

Subordinated Convertible Debentures Payable

Subordinated debentures payable consisted of:

	2014		2013
6 1/2%, due June, 1991	$	527,000	$	1,034,000
6%, due May, 1992		8,025,000		8,025,000
	$	8,552,000	$	9,059,000

The Trustee of the 6.5% subordinated convertible debentures, which matured in June 1991, with an original face amount of $1,034,000, provided notice of a final distribution to holders of such debentures on September 2, 2014.  In connection with such final distribution, the Trustee applied $89,000 of the $184,000 debenture reserve fund that the Trustee had maintained with respect to such debentures, toward debenture administration fees charged by the Trustee, and the remaining balance of $95,000 of the debenture reserve fund for final distribution to holders of such debentures who surrender their respective debentures.

As of December 31, 2014, such debentures with a face amount of $507,000 were surrendered by their respective debenture holders, utilizing $47,000 of the debenture reserve fund in payment as a final distribution to such debenture holders.  Accordingly, the Company has recognized $460,000 in forgiveness of debt during 2014.  In addition, accrued interest in the amount of $853,000 on such debentures that have been surrendered was recorded as forgiveness of interest expense in 2014.  As of December 31, 2014 the outstanding principal on such 6.5% subordinated convertible debentures that were surrendered by the respective holders equal $527,000 plus accrued and unpaid interest of $894,000 which will be similarly recorded as debt and interest forgiveness when these debentures are surrendered.  As the Company has consistently stated in prior filings, the Company believes that any potential claims by the respective debenture holders on such 6.5% subordinated convertible debentures would be barred under the applicable statutes of limitations.

Since issuance, $650,000 and $152,000 of the 6½% and 6% debentures, respectively, have been converted into common stock.  This conversion feature is no longer in effect.

The Company is in default of certain sinking fund and interest payments on both subordinated convertible debentures totaling $8,552,000 and $9,059,000 in principal plus accrued and unpaid interest of $21,389,000 and $21,007,000 as of December 31, 2014 and December 31, 2013, respectively.

The debentures are not collateralized and are not subordinate to each other, but are subordinate to senior indebtedness ($3,198,000 at December 31, 2014).  Payment of dividends on the Company’s common stock is restricted under the terms of the two indentures pursuant to which the outstanding debentures are issued.

In order to meet liquidity needs for future periods, the Company has been and intends to continue to actively seek buyers for the remaining portion of the underdeveloped acreage, when appropriate

No assurances can be made that the Company can achieve this objective.