Preliminary Note
The Company's remaining land inventory consists of an approximate seven acre
parcel with an estimated value of $200,000 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"). During
the three months ended June 30, 2022, two single family lots were sold and
Sugarmill Woods realized approximately $38,000. In addition, Punta Gorda Isles
Sales, Inc. ("PGIS"), a wholly owned subsidiary of the Company, owns eleven
parcels of real estate in Charlotte County, Florida, which in total approximates
58 acres. These eleven 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 PGI met and
continues to meet all of the 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. As the Company reviews its
circumstances, it has met the conditions as an Inactive Registrant since 2017.
The Company, formerly a Florida residential developer, is dormant with
approximately 65 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 $95.1 million as of December 31, 2021.
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.
As of June 30, 2022, 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
Revenue for the three months ended June 30, 2022 was $38,000 compared to revenue
of $14,000 for the comparable 2021 period. Real estate sales revenue was $38,000
for the three months ended June 30, 2022 compared to real estate sales revenue
of $10,000 for the three months ended June 30, 2021. Other revenue of $4,000 for
the three months ended June 30, 2021 consisted of revenue received for a
settlement claim from over 30 year ago when the Company was operating as a home
builder. There was no other revenue for the three months ended June 30, 2022.
Expenses for the three month period ended June 30, 2022 increased by $25,000
when compared to the same period in 2021 as follows:
Increase
(Decrease)
($ in thousands)
Cost of real estate sales $ 15
Interest 10
Taxes and Assessments (1 )
General and administrative 1
$ 25
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PGI INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
The cost of real estate sales for the three months ended June 30, 2022 increased
by $15,000 compared to the three months ended June 30, 2021, solely as a result
of the costs and expenses incurred in connection with sales of real estate in
the three months ended June 30, 2022. There was no such expense in the
comparable period in 2021 due to the sale of an environmentally sensitive parcel
of land in the three months ended June 30, 2021 for which the Company had no
cost basis.
Interest expense relating to the Company's outstanding debt, held by non-related
parties, increased by $10,000 during the three month period ended June 30, 2022
compared to the same period in 2021. Interest expense relating to the Company's
outstanding debt for the 6% subordinated convertible debentures, increased by
$8,000 primarily as a result of interest compounding on past due balances.
Interest expense for notes payable increased by $2,000 due to an increase in the
average prime interest rate to 3.94% for the three month period ended June 30,
2022 compared to 3.25% for the same period in 2021.
Taxes and assessments expense decreased by $1,000 during the three month period
ended June 30, 2022 compared to the same period in 2021 due to the sale of real
estate parcels in 2022 and 2021.
General and administrative expenses during the three month period ended June 30,
2022 increased by $1,000 when compared to the same period in 2021 due to an
increase in fees relating to the filing of the Company's periodic reports.
The Company incurred a net loss of $358,000 during the three month period ended
June 30, 2022 compared to a net loss of $357,000 for the comparable period in
2021. After deducting preferred dividends, totaling $160,000 for the three month
periods ended June 30, 2022 and 2021, with respect to the Class A Preferred
Stock, a net loss per share of $(.10) was incurred for the three month periods
ended June 30, 2022 and 2021, respectively. The total cumulative preferred
dividends in arrears with respect to the Class A Preferred Stock through June
30, 2022 is $17,395,000.
Revenue for the six months ended June 30, 2022 was $38,000 compared to revenue
of $14,000 for the comparable 2021 period. Real estate sales revenue was $38,000
for the six months ended June 30, 2022 compared to real estate sales revenue of
$10,000 for the six months ended June 30, 2021. Other revenue of $4,000 for the
six months ended June 30, 2021 consisted of revenue received for a settlement
claim from over 30 year ago when the Company was operating as a home builder.
There was no other revenue for the six months ended June 30, 2022.
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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 six month period ended June 30, 2022 increased by $32,000 when
compared to the same period in 2021 as follows:
Increase
(Decrease)
($ in thousands)
Cost of real estate sales $ 15
Interest 17
Taxes and Assessments (1 )
General and administrative 1
$ 32
The cost of real estate sales for the six months ended June 30, 2022 increased
by $15,000 compared to the six months ended June 30, 2021, solely as a result of
the costs and expenses incurred in connection with sales of real estate in the
three months ended June 30, 2022. There was no such expense in the comparable
period in 2021 due to the sale of an environmentally sensitive parcel of land in
the six months ended June 30, 2021 for which the Company had no cost basis.
Interest expense relating to the Company's current outstanding debt, held by
non-related parties, increased by $17,000 during the six month period ended June
30, 2022 compared to the same period in 2021. Interest expense relating to the
Company's outstanding debt for the 6% subordinated debentures, increased by
$15,000 primarily as a result of interest compounding on past due balances.
Interest expense for notes payable increased by $2,000 due to an increase in the
prime interest rate of 4.75% as of June 30, 2022 compared to 3.25% as of June
30, 2021.
Taxes and assessments expense decreased by $1,000 during the six month period
ended June 30, 2022 compared to the same period in 2021 due to the sale of real
estate parcels in 2022 and 2021.
General and administrative expenses during the six month period ended June 30,
2022 increased by $1,000 when compared to the same period in 2021 due to an
increase in fees relating to the filing of the Company's periodic reports.
The Company incurred a net loss of $734,000 during the six month period ended
June 30, 2022 compared to a net loss of $726,000 for the comparable period in
2021. After deducting preferred dividends, totaling $320,000 for the six month
periods ended June 30, 2022 and 2021, with respect to the Class A Preferred
Stock, a net loss per share of $(.20) was incurred for the six month periods
ended June 30, 2022 and 2021, respectively.
15
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PGI INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Cash Flow Analysis
During the six month period ended June 30, 2022, the Company's net cash used in
operating activities was $25,000 compared to $17,000 for the comparable period
in 2021. The 2022 cash used in operating activities includes $30,000 of interest
paid to the collateralized convertible debenture holders. There was no cash
provided by or used in financing or investing activities during the six month
periods ended June 30, 2022 and 2021.
Analysis of Financial Condition
Total assets decreased by $39,000 at June 30, 2022 compared to total assets at
December 31, 2021, reflecting the following changes:
June 30, December 31,
2022 2021 (Decrease)
($ in thousands)
Cash $ 33 $ 58 $ (25 )
Land inventory - 14 (14 )
$ 33 $ 72 $ (39 )
During the six month period ended June 30, 2022, cash decreased by $25,000,
compared to December 31, 2021 as a result of sale proceeds received of $38,000
with payments of $30,000 to related parties for accrued interest payable in
connection with the collateralized convertible debentures and cash expended of
$33,000 for the Company payments of administrative costs.
Land inventory decreased by $14,000 during the first six months of 2022 as a
result of the respective real estate sales during such period. There is one
remaining parcel of seven acres which had been the subject of a Florida EPA
Clean-Up Order. The Order has been resolved. Recent negotiations with respect to
a proposed purchase suggests a value of approximately $200,000. The other land
parcels are affected by environmentally sensitive land conditions or easements.
The Company has recorded no carrying value for the remaining land holdings.
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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 $95,848,000 at June 30, 2022 compared to
approximately $95,149,000 at December 31, 2021, reflecting the following changes
which resulted in an increase of $699,000 of liabilities:
June 30, December 31, Increase
2022 2021 (Decrease)
($ in
thousands)
Accounts payable and accrued expenses $ 156 $ 157 $ (1 )
Accrued real estate taxes 4 5 (1 )
Accrued interest 86,465 85,764 701
Credit agreements: -
Notes payable 1,198 1,198 -
Subordinated convertible debentures payable 8,025 8,025 -
$ 95,848 $ 95,149 $ 699
During the six month period ended June 30, 2022, the amount of accounts payable
and accrued expenses decreased by $1,000 primarily as a result of timing
differences. Accrued real estate taxes decreased by $1,000 during the six month
period ended June 30, 2022 due to the payment of a portion of the 2021 accrued
real estate taxes in the six month period ended June 30, 2022. Accrued interest
during the six month period ended June 30, 2022 increased by $701,000 as a
result of $731,000 of interest expense for such period which was offset by the
payment of $30,000 of accrued interest for the collateralized convertible
debentures which are held by related parties.
The Company remains in default on the entire principal amount plus interest of
its subordinated convertible debentures and notes payable as well as the
remaining accrued interest owed with respect to the collateralized convertible
debentures.
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PGI INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
The principal and accrued interest amounts due as of June 30, 2022 are as
indicated in the following table:
June 30, 2022
Principal Accrued
Amount Due Interest
($ in thousands)
Subordinated convertible debentures:
At 6%, due May 1992 $ 8,025 $ 30,210
Collateralized convertible debentures-related party:
At 14%, due July 8, 1997
$ - $ 52,710
Notes payable:
At prime plus 2%, all past due $ 1,176 $ 3,545
Non-interest bearing 22 -
$ 1,198 $ 3,545
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.
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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