Preliminary Note
The Company's remaining land inventory consists of 6 single family lots, an
approximate 7 acre parcel and some other minor parcels of real estate consisting
of easements in Citrus County Florida, which are owned through its wholly owned
subsidiary, Sugarmill Woods, Inc. ("Sugarmill Woods"). The single family lots
and the 7 acre parcel in Citrus County have been listed for sale with a real
estate agent. Subsequent to September 30, 2021, three of the single family lots
were sold and PGI realized approximately $60,000. In addition, Punta Gorda Isles
Sales, Inc. ("PGIS"), a wholly owned subsidiary of the Company, owns 11 parcels
of real estate in Charlotte County, Florida, which in total approximates 58
acres. These parcels have limited value because of associated developmental
constraints such as wetlands, easements, and/or other obstacles to development
and sale.
In early 2019, the Board of Directors of PGI concluded that it meets all
conditions under which a registrant may be deemed an "Inactive Entity" as that
term is defined or contemplated in Regulation S-X 3-11 and as the term "Inactive
Registrant" is further contemplated in the Securities and Exchange Commission's
Division of Corporation Finance's Financial Reporting Manual section 1320.2.
Under Regulation 3-11 of Regulation S-X, the financial statements required
thereunder with respect to an Inactive Registrant for purposes of reports
pursuant to the Securities Exchange Act of 1934, including but not limited to
annual reports on Form 10-K, may be unaudited. A representative of PGI
informally discussed its view that PGI is an Inactive Registrant with a staff
member of the Chief Accountant's Office in the Division of Corporation Finance
in February 2019.
As an Inactive Registrant, PGI currently intends to continue to timely file
Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K with the
Securities and Exchange Commission (the "SEC"). PGI currently intends to include
in such Quarterly and Annual Reports all consolidated financial statements
required to be included therein pursuant to Regulation S-X. The consolidated
financial statements were audited prior to 2019 by BKD, LLP ("BKD") and a review
was performed with respect to 2019 by Milhouse & Neal, LLP. However, due to its
inactive status and diminishing financial resources, the aforementioned
consolidated financial statements will not be reviewed or audited by a PCAOB
registered public accounting firm for periods after 2019. Such disclosure was
made on Form 8-K filed with the SEC on July 2, 2020.
PGI meets all of the conditions in Regulation S-X 3-11 for an "Inactive
Registrant" which are:
(a) Gross receipts not in excess of $100,000;
(b) Not purchasing or selling any of its own stock or granted options
therefor;
(c) Expenditures for all purposes not in excess of $100,000 (see discussion);
(d) No material change in the business has occurred during the fiscal year;
(e) No securities exchange or governmental authority having jurisdiction over
the entity requires the entity to furnish audited financial statements.
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PGI INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
PGI has been an SEC registrant for over 40 years. The Company has filed with the
SEC as an Inactive Registrant since 2017.
The Company, formerly a Florida residential developer, is dormant with less than
70 acres of remaining landholdings, much of which has little value due to
various restrictions. The Company's consolidated financial statements show it
has a Stockholders' Deficiency of $93.7 million as of December 31, 2020. BKD,
the Company's PCAOB registered public accounting firm until the date the Company
filed its Form 10-K for Fiscal 2018 which was February 25, 2019, expressed a
"going concern" opinion with respect to the Company for its Fiscal 2018
financial statements and had expressed such opinions for many years previously.
PGI has had no trading of its securities in many years. Any future real estate
transactions by the Company will be limited, uncertain as to timing and as to
value. Ultimately, PGI expects that proceeds from sales of its remaining real
estate, if any, will provide some minimal recoveries for PGI's senior
debtholders. PGI has been an SEC registrant for over 40 years.
As of September 30, 2021, the Company remained in default under its subordinated
convertible debentures and notes payable, as well as the remaining balance of
accrued interest with respect to its collateralized convertible debentures.
Results of Operations
There was no revenue for the three month period ended September 30, 2021
compared to revenue of $2,000 for the three month period ended September 30,
2020. Revenue for the three months ended September 30, 2020 represents other
income from a lot lien receivable recovery recorded in previous years which had
been fully provided for cancellation.
Expenses for the three month period ended September 30, 2021 increased by
$416,000 when compared to the same period in 2020 as follows:
Increase
(Decrease)
($ in thousands)
Interest $ 6
Non-recurrence of forgiveness of debt and interest 410
Consulting and accounting-related party (2 )
General and administrative 2
$ 416
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PGI INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Interest expense relating to the Company's outstanding debt, held by non-related
parties, increased by $6,000 during the three month period ended September 30,
2021 compared to the same period in 2020. Interest expense relating to the
Company's outstanding debt for the 6% subordinated convertible debentures,
increased by $7,000 primarily as a result of interest compounding on past due
balances. Interest expense relating to the 6.5% subordinated debentures
decreased by $1,000 compared to the same period in 2020. The debentures were
surrendered in 2020 with the escheatment to the respective states of debenture
holders.
There was no forgiveness of debt and interest for the three months ended
September 30, 2021 compared to $410,000 for the three month period ended
September 30, 2020. The forgiveness of debt and interest in the three months
ended September 30, 2020 is attributed to the 6.25% subordinated debentures
which matured in June, 1991. The debentures were escheated to the states of the
respective debenture holders.
Consulting and accounting related party expenses decreased by $2,000 during the
three month period ended September 30, 2021 compared to the same period in 2020
as a result of a decrease in services provided by Love Real Estate Company, an
affiliate of Love Investment Company, the Company's primary preferred stock
shareholder.
General and administrative expenses during the three month period ended
September 30, 2021 increased by $2,000 when compared to the same period in 2020
due to expenses incurred with listing the single family lots and the 7 acre
parcel in Citrus County for sale.
The Company incurred a net loss of $376,000 during the three month period ended
September 30, 2021 compared to net income of $42,000 for the comparable period
in 2020. After deducting preferred dividends, totaling $160,000 for the three
month periods ended September 30, 2021 and 2020, with respect to the Class A
Preferred Stock, a net loss per share of $(.10) and $(.02) was incurred for the
three month periods ended September 30, 2021 and 2020, respectively. The total
cumulative preferred dividends in arrears with respect to the Class A Preferred
Stock through September 30, 2021 is $16,915,000.
Revenue for the nine months ended September 30, 2021 increased by $12,000 to
$14,000 from $2,000 for the comparable period in 2020. Real estate sales
increased by $10,000 in 2021 due to the sale of an environmentally sensitive
parcel of land for which the Company has no cost basis. Other income for the
nine months ended September 30, 2021 increased by $2,000 to $4,000 from $2,000
for the comparable period in 2020. Other revenue of $4,000 for the nine months
ended September 30, 2021 represents income from a settlement claim from over 30
years ago when the Company was operating as a home builder.
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PGI INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Expenses for the nine month period ended September 30, 2021 decreased by
$379,000 when compared to the same period in 2020 as follows:
Increase
(Decrease)
($ in thousands)
Interest $ 12
Non-recurrence of forgiveness of debt and interest 410
Taxes and Assessments 1
Consulting and accounting-related party (8 )
Legal and professional (35 )
General and administrative (1 )
$ 379
Interest expense relating to the Company's current outstanding debt, held by
non-related parties, increased by $12,000 during the nine month period ended
September 30, 2021 compared to the same period in 2020. Interest expense
relating to the Company's outstanding debt for the 6% subordinated debentures,
increased by $22,000 primarily as a result of interest compounding on past due
balances. Interest expense relating to the 6.5% subordinated debentures
decreased by $6,000 compared to the same period in 2020. The debentures were
surrendered in 2020 with the escheatment to the respective states of debenture
holders. In addition, interest expense for notes payable decreased by $4,000 due
to a decrease in the average prime interest rate to 3.25% for the nine month
period ended September 30, 2021 compared to 3.64% for the same period in 2020.
Taxes and assessments expense increased by $1,000 during the nine month period
ended September 30, 2021 compared to the same period in 2020 due to the delayed
payment or non-payment of real estate taxes in 2021. In 2020 the Company
utilized early payment discounts for the real estate tax assessments.
Consulting and accounting related party expenses decreased by $8,000 during the
nine month period ended September 30, 2021 compared to the same period in 2020
as a result of a decrease in services provided by Love Real Estate Company, an
affiliate of Love Investment Company, the Company's primary preferred stock
shareholder.
Legal and professional expenses decreased by $35,000 during the nine month
period ended September 30, 2021 when compared to the same period in 2020.
General and administrative expenses during the nine month period ended September
30, 2021 decreased by $1,000 when compared to the same period in 2020 primarily
due to a $3,000 decrease in expenses incurred for the Company's tax return
preparation. The $3,000 decrease is offset by a $2,000 increase in expenses
incurred with listing the single family lots and the 7 acre parcel in Citrus
County for sale.
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PGI INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
The Company incurred a net loss of $1,102,000 during the nine month period ended
September 30, 2021 compared to a net loss of $737,000 for the comparable period
in 2020. After deducting preferred dividends, totaling $480,000 for the nine
month periods ended September 30, 2021 and 2020, with respect to the Class A
Preferred Stock, a net loss per share of $(.20) and $(.23) was incurred for the
nine month periods ended September 30, 2021 and 2020, respectively.
Cash Flow Analysis
During the nine month period ended September 30, 2021, the Company's net cash
used in operating activities was $31,000 compared to $215,000 for the comparable
period in 2020. The 2020 cash used in operating activities includes $125,000 of
interest paid to the collateralized convertible debenture holders. There was no
cash provided by or used in financing or investing activities during the nine
month periods ended September 30, 2021 and 2020.
Analysis of Financial Condition
Total assets decreased by $31,000 at September 30, 2021 compared to total assets
at December 31, 2020, reflecting the following changes:
September 30, December 31,
2021 2020 (Decrease)
($ in thousands)
Cash $ 50 $ 81 $ (31 )
Land inventory 14 14 -
$ 64 $ 95 $ (31 )
During the nine month period ended September 30, 2021, cash decreased by
$31,000, compared to December 31, 2020 as a result of the Company paying its
administrative costs.
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PGI INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Liabilities were approximately $94,835,000 at September 30, 2022 compared to
approximately $93,764,000 at December 31, 2020, reflecting the following changes
which resulted in an increase of $1,071,000 of liabilities:
September 30, December 31, Increase
2021 2020 (Decrease)
($ in
thousands)
Accounts payable and accrued expenses $ 157 $ 160 $ (3 )
Accrued real estate taxes 4 4 -
Accrued interest 85,451 84,377 1,074
Credit agreements: -
Notes payable 1,198 1,198 -
Subordinated convertible
debentures payable 8,025 8,025 -
$ 94,835 $ 93,764 $ 1,071
During the nine month period ended September 30, 2021, the amount of accounts
payable and accrued expenses decreased by $3,000 primarily as a result of timing
differences. Accrued interest during the nine month period ended September 30,
2021 increased by $1,074,000 due to the amount of interest for such period.
During the nine month period ended September 30, 2021, the Company made no
interest or principal payments on its outstanding notes payable and subordinated
convertible debentures.
The Company remains in default on the entire principal amount plus interest of
its subordinated convertible debentures and notes payable as well as the
remaining accrued interest owed with respect to the collateralized convertible
debentures.
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PGI INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
The principal and accrued interest amounts due as of September 30, 2021 are as
indicated in the following table:
September 30, 2021
Principal Accrued
Amount Due Interest
($ in thousands)
Subordinated convertible debentures:
At 6%, due May 1992 $ 8,025 $ 29,165
Collateralized convertible debentures-related party:
At 14%, due July 8, 1997
$ - $ 52,790
Notes payable:
At prime plus 2%, all past due $ 1,176 $ 3,496
Non-interest bearing 22 -
$ 1,198 $ 3,496
The Company does not have sufficient funds available (after payment of, or the
reserving for the payment of, anticipated future administrative expenses) to
satisfy the principal or interest obligations on the above debentures and notes
payable or any arrearage in preferred dividends.
The Company remains totally dependent upon the sale of parcels of its various
remaining properties with respect to its ability to make any future debt service
payments. Subsequent to September 30, 2021, the Company sold three single family
lots and realized approximately $60,000.
The Company has discontinued the services of independent registered public
accounting firms due to the Company's diminishing financial resources. For 2019,
and many years prior, the accounting firms have included an explanatory
paragraph regarding the Company's ability to continue as a going concern in
their reports on the Company's consolidated financial statements.
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PGI INCORPORATED AND SUBSIDIARIES
Forward Looking Statements
The discussion set forth in this Item 2, as well as other portions of this Form
10-Q, may contain forward-looking statements. Such statements are based upon the
information currently available to management of the Company and management's
perception thereof as of the date of the Form 10-Q. When used in this Form 10-Q,
words such as "anticipates," "estimates," "believes," "expects," and similar
expressions are intended to identify forward-looking statements. Such statements
are subject to risks and uncertainties. Actual results of the Company's
operations could materially differ from those forward-looking statements. The
differences could be caused by a number of factors or combination of factors
including, but not limited to: changes in the real estate market in Florida and
the counties in which the Company owns any property; institution of legal action
by the bondholders for collection of any amounts due under the subordinated
convertible debentures (notwithstanding the Company's belief that at least a
portion of such actions might be barred under applicable statute of
limitations); changes in management strategy; and other factors set forth in
reports and other documents filed by the Company with the Securities and
Exchange Commission from time to time.
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