8. Subordinated Convertible Debentures Payable

12 Months Ended

Dec. 31, 2018

Convertible Subordinated Debt [Abstract]

Subordinated Convertible Debentures Payable

Subordinated debentures payable consisted of:

	2018		2017
	($ in thousands)
6.5%, due June, 1991	$	138	$	447
6%, due May, 1992		8,025		8,025
	$	8,163	$	8,472

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 has maintained a debenture reserve fund with a balance of $13,000 and $41,000 as of December 31, 2018 and 2017, respectively, available for distribution to holders of such debentures who surrender their respective debenture certificates.

During the year ended December 31, 2018, $28,000 of the debenture reserve funds were utilized with $2,000 disbursed in final distribution to debenture holders and $26,000 disbursed in escheatment to states of respective debenture holders as debentures with a face amount of $22,000 were surrendered by debenture holders and $287,000 in face amount of debentures were effectively surrendered with the escheatment of respective funds to the states of debenture holders, respectively. Accordingly, the Company has recognized $281,000 in forgiveness of debt during the year ended December 31, 2018. In addition, accrued interest of $594,000 on such debentures that are considered surrendered was recorded as forgiveness of interest expense during the year ended December 31, 2018. There were no debentures surrendered or escheated in 2017 and no funds were utilized from the debenture reserve account.

As of December 31, 2018, the outstanding principal balance on such 6.5% subordinated convertible debentures that were not surrendered by the respective holders, or escheated by the Trustee to the states of residence of the respective holders, equals $138,000 plus accrued and unpaid interest of $270,000. The outstanding principal on such respective debentures as of December 31, 2017 was $447,000 plus accrued and unpaid interest of $846,000.

The 6.5% Subordinated convertible debenture balances for the years ended December 31, 2018 and 2017 are as follows:

	2018		2017
	($ in thousands)
Original face value	$	1,034	$	1,034
Outstanding debenture principal balance		138		447
Face value of debentures surrendered		22		-
Face value of debentures escheated		287		-
Accrued and unpaid interest balance		270		846
Debenture reserve account balance		13		41
Debenture reserve funds utilized
in payment of final distribution		2		-
Debenture reserve funds utilized
in escheatment to states of debenture holders		26		-
Forgiveness of debt		281		-
Forgiveness of interest		594		-

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 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.

Since issuance, $650,000 and $152,000 of the 6.5% 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 $8,163,000 and $8,472,000 in principal plus accrued and unpaid interest of $25,744,000 and $25,032,000 as of December 31, 2018 and 2017, respectively.

The debentures are not collateralized and are not subordinate to each other, but are subordinate to senior indebtedness ($1,198,000 at December 31, 2018 and 2017). 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 maximize the amounts realized for the debt holders, the Company has been and intends to continue to seek buyers for the remaining landholdings. No assurances are offered regarding the timing of or the values to be realized from future land sales.