9. Primary Lender Credit Agreements, Notes Payable, Subordinated and Convertible Debentures Payable

6 Months Ended

Jun. 30, 2015

Primary Lender Credit Agreements Notes Payable Subordinated And Convertible Debentures Payable

Primary Lender Credit Agreements, Notes Payable, Subordinated and Convertible Debentures Payable

Credit agreements with the Company’s primary lender and notes payable consisted of the following:

	June 30,		December 31,
	2015		2014
	($ in thousands)
Credit agreements - primary lender-related party
balance is past due, bearing interest
at prime plus 5%; due June 1, 1997	$	500	$	500
Notes payable - $1,176,000
bearing interest at prime plus 2%,
the remainder non-interest bearing,
all past due		1,198		1,198
		1,698		1,698
Subordinated debentures payable:
At 6-1/2% interest; due June 1, 1991		447		527
At 6% interest; due May 1, 1992		8,025		8,025
		8,472		8,552
Collateralized convertible debentures
payable-related party:
At 14% interest; due July 8, 1997,
convertible into shares of common stock
at $1.72 per share		1,500		1,500
	$	11,670	$	11,750

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 final distribution to holders of such debentures on September 2, 2014.  In connection with such final distribution, the Trustee has 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 such reserve fund in the amount of $95,000 has been designated by the Trustee for final distribution to holders of such debentures.  

During the six month period of 2015 and year ended December 31, 2014, such 6.5% subordinated convertible debentures with face amounts of $80,000 and $507,000 have been surrendered by their respective debenture holders, respectively.  Funds utilized from the debenture reserve account were $7,000 and $47,000 during the first six months of 2015 and during the twelve month period of 2014, respectively, in payment of a final distribution to such debenture holders.   Accordingly, the Company has recognized $73,000 and $460,000 in forgiveness of debt during the first six months of 2015 and during the twelve month period of 2014, respectively.  

In addition, accrued interest in the amounts of $136,000 and $853,000 on such debentures that have been surrendered was recorded as forgiveness of interest expense during the first six months of 2015 and during the twelve month period of 2014, respectively.  

As of June 30, 2015 the outstanding principal balance on such 6.5% subordinated convertible debentures that were not surrendered by the respective holders equals $447,000 plus accrued and unpaid interest of $773,000.  If and when such remaining debentures are surrendered to the Trustee, the applicable portion of such principal and accrued interest will similarly be recorded as debt and accrued interest forgiveness.  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.