Item
1. Financial Statements
PGI INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(UNAUDITED)
($ in thousands, except share and per share data)
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|
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|
|
|
|
|
|
ASSETS
|
|
|
|
Cash
|
$64
|
$81
|
|
Land
inventory
|
14
|
14
|
|
|
$78
|
$95
|
|
LIABILITIES
|
|
|
|
Accounts
payable and accrued expenses
|
$158
|
$160
|
|
Accrued
real estate taxes
|
2
|
4
|
|
Accrued
interest:
|
|
|
|
Subordinated
convertible debentures payable
|
28,478
|
28,137
|
|
Convertible
debentures payable-related party
|
52,790
|
52,790
|
|
Notes
payable
|
3,465
|
3,450
|
|
Credit
agreements:
|
|
|
|
Notes
payable
|
1,198
|
1,198
|
|
Subordinated
convertible debentures payable
|
8,025
|
8,025
|
|
|
94,116
|
93,764
|
|
STOCKHOLDERS'
DEFICIENCY
|
|
|
|
Preferred
stock, par value $1.00 per share;
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|
authorized
5,000,000 shares; 2,000,000
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|
Class
A cumulative convertible shares issued
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|
|
|
and
outstanding; (liquidation preference of
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|
|
$8,000
plus unpaid cumulative dividends of $16,595)
|
2,000
|
2,000
|
|
Common
stock, par value $.10 per share;
|
|
|
|
authorized
25,000,000 shares; 5,317,758
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|
|
|
shares
issued and outstanding
|
532
|
532
|
|
Paid-in
capital
|
13,498
|
13,498
|
|
Accumulated
deficit
|
(110,068)
|
(109,699)
|
|
|
(94,038)
|
(93,669)
|
|
|
$78
|
$95
|
See
accompanying notes to Condensed Consolidated Financial
Statements.
Part
I Financial Information (Continued)
PGI INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
($ in thousands, except per share data)
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|
|
|
|
|
|
|
|
|
|
|
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|
REVENUES
|
$-
|
$-
|
|
|
|
|
|
COSTS
AND EXPENSES
|
|
|
|
Interest
|
356
|
355
|
|
Taxes
and assessments
|
1
|
1
|
|
Consulting
and accounting-
|
|
|
|
related
party
|
6
|
9
|
|
Legal
and professional
|
-
|
30
|
|
General
and administrative
|
6
|
4
|
|
|
369
|
399
|
|
NET
LOSS
|
$(369)
|
$(399)
|
|
|
|
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|
NET
LOSS PER SHARE(*)
|
|
|
|
AVAILABLE
TO COMMON
|
|
|
|
STOCKHOLDERS-Basic
and diluted
|
$(0.10)
|
$(0.11)
|
*Considers the effect of dividends on preferred stock for the three
months ended
March 31, 2021 and 2020.
See
accompanying notes to Condensed Consolidated Financial
Statements.
Part
I Financial Information (Continued)
PGI INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
($ in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash used in operating activities
|
$(17)
|
$(21)
|
|
|
|
|
|
Net
change in cash
|
(17)
|
(21)
|
|
|
|
|
|
Cash
at beginning of period
|
81
|
309
|
|
|
|
|
|
Cash
at end of period
|
$64
|
$288
|
See
accompanying notes to Condensed Consolidated Financial
Statements.
Part
I Financial Information (Continued)
PGI INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
(UNAUDITED)
Three Months ended March 31, 2021
($ in thousands, except share data)
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|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Balances at
1/1/21
|
2,000,000
|
$2,000
|
5,317,758
|
$532
|
$13,498
|
$(109,699)
|
$(93,669)
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
(369)
|
(369)
|
|
Balances at
3/31/21
|
2,000,000
|
$2,000
|
5,317,758
|
$532
|
$13,498
|
$(110,068)
|
$(94,038)
|
Three Months ended March 31, 2020
($ in thousands, except share data)
|
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|
|
|
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|
|
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|
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|
|
|
|
|
|
|
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|
Balances at
1/1/20
|
2,000,000
|
$2,000
|
5,317,758
|
$532
|
$13,498
|
$(108,594)
|
$(92,564)
|
|
|
|
|
|
|
|
|
|
|
Net
Loss
|
-
|
-
|
-
|
-
|
-
|
(399)
|
(399)
|
|
Balances at
3/31/20
|
2,000,000
|
$2,000
|
5,317,758
|
$532
|
$13,498
|
$(108,993)
|
$(92,963)
|
See
accompanying notes to Condensed Consolidated Financial
Statements.
PGI
INCORPORATED AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
(1)
Basis of
Presentation
The
accompanying unaudited condensed consolidated financial statements
of PGI Incorporated (“PGI”) and its subsidiaries (the
“Company”) have been prepared in accordance with the
instructions to Form 10 - Q and therefore do not include all
disclosures necessary for fair presentation of financial position,
results of operations and cash flows in conformity with generally
accepted accounting principles. The Company's most recent audited
financial statements are for the year ended December 31, 2018. As
an Inactive Registrant, the year 2019 was reviewed by independent
public accountants. For these years and for many years prior, the
Company's independent registered public accounting firm included an
explanatory paragraph regarding the Company's ability to continue
as a going concern.
The
Company was founded in 1958, and up until the mid 1990’s was
in the business of building and selling homes, developing and
selling home sites and selling undeveloped or partially developed
tracts of land. Over approximately the last 30 years, the
Company’s business focus and emphasis changed substantially
as it has concentrated its sales and marketing efforts almost
exclusively on the disposition of its remaining real
estate.
The
Company’s major efforts and activities have been, and
continue to be, to sell the remaining assets of the Company, to
repay its indebtedness, and to pay the ordinary on-going
administrative costs of the Company. The potential values of the
land parcels held for sale has been difficult to assess. The
Company will seek to realize full market value for each remaining
asset. Certain of these assets may be of so little value and
marketability that the Company may elect not to pay the real estate
taxes on selected parcels, which may eventually result in a defacto
liquidation of such property by subjecting such property to a tax
sale. In management’s judgement, the remaining assets will be
insufficient to satisfy much, if any, of the outstanding
indebtedness and there will be no recoveries by the shareholders.
Consequently, there is substantial doubt about the Company’s
ability to continue as a going concern within one year after the
date that the financial statements are issued.
Certain
information and note disclosures normally included in the
Company’s annual financial statements prepared in accordance
with generally accepted accounting principles have been condensed
or omitted. These condensed consolidated financial statements
should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company’s Form
10-K annual report for 2020 filed with the Securities and Exchange
Commission.
The
Company remains in default under the indentures governing its
unsecured subordinated debentures. (See Management's Discussion and
Analysis of Financial Condition and Results of Operations and Notes
7, 8, and 9 to the Company's consolidated financial statements for
the year ended December 31, 2020, as contained in the Company's
Annual Report on Form 10 - K).
All
adjustments (consisting of only normal recurring accruals)
necessary for fair presentation of financial position, results of
operations and cash flows have been made. The results for the three
months ended March 31, 2021 are not necessarily indicative of
operations to be expected for the fiscal year ending December 31,
2021 or any other interim period.
PGI
INCORPORATED AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
(continued)
Basic
per share amounts are computed by dividing net income (loss), after
deducting current period dividends on the Company's preferred
stock, by the weighted average number of common shares outstanding
during the period. The weighted average number of common shares
outstanding for the three months ended March 31, 2021 and 2020 was
5,317,758.
Diluted
per share amounts are computed by dividing net income (loss)
attributable to common shareholders by the weighted average number
of common shares outstanding, after adjusting for the estimated
effect of the assumed conversion of all cumulative convertible
preferred stock and outstanding convertible debentures, if
dilutive, into shares of common stock. For the three months ended
March 31, 2021 and 2020, the assumed conversion of all outstanding
convertible preferred stock and collateralized convertible
debentures would have been anti-dilutive.
The
following is a summary of the calculations used in computing basic
and diluted loss per share for the three months ended March 31,
2021 and 2020.
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|
except share and per share data)
|
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Net
Loss
|
$(369)
|
$(399)
|
|
|
|
|
|
Preferred
dividends
|
(160)
|
(160)
|
|
|
|
|
|
Loss
Available to
|
$(529)
|
$(559)
|
|
Common
shareholders
|
|
|
|
|
|
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|
Weighted
Average Number
|
|
|
|
Of
Common Shares
|
|
|
|
Outstanding
|
5,317,758
|
5,317,758
|
|
|
|
|
|
Basic
and Diluted Loss
|
|
|
|
Per
Common Share
|
$(0.10)
|
$(0.11)
|
PGI
INCORPORATED AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
(continued)
(3)
Statement of Cash
Flows
The
Financial Accounting Standards Board Accounting Standards
Codification Topic No. 230, “Statement of Cash Flows”,
requires a statement of cash flows as part of a full set of
financial statements. For quarterly reporting purposes, the Company
has elected to condense the reporting of its net cash flows. There
were no payments of interest for the three month periods ended
March 31, 2021 and March 31, 2020.
Land
inventory consisted of
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|
|
|
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|
|
Fully
improved land
|
$14
|
$14
|
(5)
Accounts Payable
and Accrued Expenses
Accounts payable
and accrued expenses consisted of:
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable
|
$-
|
$3
|
|
Accrued
accounting review and
|
|
|
|
tax
preparation expense
|
4
|
3
|
|
Accrued
debenture fees
|
153
|
153
|
|
Accrued
miscellaneous
|
1
|
1
|
|
|
$158
|
$160
|
|
|
|
|
|
Accrued
real estate taxes consisted of:
|
|
|
|
Current
real estate taxes
|
$2
|
$4
|
PGI
INCORPORATED AND SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
(continued)
(6)
Credit
Agreements: Notes Payable and Subordinated Convertible Debentures
Payable
Credit
agreements consisted of the following:
|
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|
|
|
|
|
|
|
|
|
Notes
payable - $1,176,000 bearing
|
|
|
|
interest
at prime plus 2%,
|
|
|
|
the
remainder non-interest bearing,
|
|
|
|
all
past due
|
$1,198
|
$1,198
|
|
|
|
|
|
Subordinated
convertible debentures payable:
|
|
|
|
At
6% interest; due May 1992
|
8,025
|
8,025
|
|
|
8,025
|
8,025
|
|
|
$9,223
|
$9,223
|
At
December 31, 2020, the Company had an operating loss carryforward
of approximately, $70,080,000 available to reduce future taxable
income. These operating losses expire at various dates through
2038.
The
following summarizes the temporary differences of the Company at
March 31, 2021 and December 31, 2020 at the statutory
rate:
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|
|
|
|
|
|
|
|
Deferred
tax asset
|
|
|
|
Net
operating loss carryforward
|
$17,893
|
$17,801
|
|
Expenses
capitalized under IRC 263(a)
|
37
|
37
|
|
Tax
credits (AMT)
|
57
|
57
|
|
Valuation
allowance
|
(17,987)
|
(17,895)
|
|
Total
deferred tax asset
|
$-
|
$-
|
(8)
Fair Value of
Financial Instruments
The
carrying amount of the Company’s financial instruments, other
than debt, approximates fair value at March 31, 2021 and December
31, 2020 because of the short maturity of those instruments. It was
not practicable to estimate the fair value of the Company’s
notes payable and its convertible debentures because these debts
are in default causing no basis for estimating value by reference
to quoted market prices or current rates offered to the Company for
debt of the same remaining maturities.
PGI
INCORPORATED AND SUBSIDIARIES
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
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”). In addition,
Punta Gorda Isles Sales, Inc. (“PGIS”), a wholly-owned
subsidiary of the Company, owns 12 parcels of real estate in
Charlotte County, Florida, which in total approximates 60 acres,
but 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 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 financials statements were audited prior to 2019 by
BKD, LLP and a review was performed with respect to 2019 by
Milhouse & Neal. 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. 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.
PGI
INCORPORATED AND SUBSIDIARIES
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
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
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 an
Inactive Registrant, PGI anticipates it will continue to provide
updates through its SEC filings.
As of
March 31, 2021, the Company remained in default under its
subordinated convertible debentures and notes payable, as well as
the accrued interest with respect to its collateralized convertible
debentures.
PGI
INCORPORATED AND SUBSIDIARIES
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations
There
was no revenue for the three month periods ended March 31, 2021 and
2020.
Expenses for the
three month period ended March 31, 2021 decreased by $30,000 when
compared to the same period in 2020. This change reflects a $30,000
decrease in legal and professional expenses and a $3,000 decrease
in consulting and accounting fees-related party which is offset by
an increase of $1,000 in interest expense and an increase of $2,000
in general and administrative expenses.
Interest expense
relating to the Company’s outstanding debt, held by
non-related parties, increased by $1,000 during the three month
period ended March 31, 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 $2,000 compared to the same period in 2020. The
debentures were surrendered in 2020 with the escheatment to the
respective states of the 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 three months ended
March 31, 2021 compared to 4.42% for the same period in
2020.
Consulting and
accounting related party expenses decreased by $3,000 when 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 $30,000 during the three
month period ended March 31, 2021 when compared to the same period
in 2020 as follows:
|
|
|
|
|
|
|
Legal
review filing of periodic reports
|
$(11)
|
|
Legal
research "going concern" alternatives
|
(9)
|
|
Legal
common title matters
|
(5)
|
|
Legal
and professional fees environmental remediation
|
(5)
|
|
|
$(30)
|
General
and administrative expenses during the three month period ended
March 31, 2021 increased by $2,000 when compared to the same period
in 2020 due to expenses incurred for the Company’s tax return
preparation.
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 $369,000 during the three month
period ended March 31, 2021 compared to a net loss of $399,000 for
the comparable period in 2020. After deducting preferred dividends,
totaling $160,000 for the three month periods ended March 31, 2021
and 2020, with respect to the Class A Preferred Stock, a net loss
per share of $(.10) and $(.11) was incurred for three month periods
ended March 31, 2021 and 2020,respectively. The total cumulative
preferred dividends in arrears with respect to the Class A
Preferred Stock through March 31, 2021 is $16,595,000.
Cash Flow Analysis
During
the three month period ended March 31, 2021, the Company’s
net cash used in operating activities was $17,000 compared to
$21,000 for the comparable period in 2020. There was no cash
provided from financing or investing activities during the three
month periods ended March 31, 2021 and 2020.
Analysis of Financial Condition
Total
assets decreased by $17,000 at March 31, 2021 compared to total
assets at December 31, 2020, reflecting the following
changes:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
$64
|
$81
|
$(17)
|
|
Land
inventory
|
14
|
14
|
-
|
|
|
$78
|
$95
|
$(17)
|
During
the three month period ended March 31, 2021, cash decreased by
$17,000 compared to December 31, 2020 as a result of the Company
funding its administrative costs.
PGI
INCORPORATED AND SUBSIDIARIES
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Liabilities were
$94,116,000 at March 31, 2021 compared to $93,764,000 at December
31, 2020, reflecting the following changes which resulted in an
increase of $352,000 of liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
payable and accrued expenses
|
$158
|
$160
|
$(2)
|
|
Accrued
real estate taxes
|
2
|
4
|
(2)
|
|
Accrued
interest
|
84,733
|
84,377
|
356
|
|
Credit
agreements:
|
|
|
|
|
Notes
payable
|
1,198
|
1,198
|
-
|
|
Subordinated
convertible
|
|
|
|
|
debentures
payable
|
8,025
|
8,025
|
-
|
|
|
|
|
|
|
|
$94,116
|
$93,764
|
$352
|
During
the three month period ended March 31, 2021, the amount of accounts
payable and accrued expenses decreased by $2,000 primarily as a
result of timing differences. Accrued real estate taxes decreased
by $2,000 during the three month period ended March 31, 2021 due to
the payment of a portion of the 2020 accrued real estate taxes in
the three month period ended March 31, 2021 and the accrual of real
estate taxes for the respective period. Accrued interest during the
three month period ended March 31, 2021 increased by $356,000 due
to the amount of interest expense for such period. During the three
month period ended March 31, 2021, the Company made no interest or
principal payments on its outstanding notes payable and
subordinated convertible debentures.
PGI
INCORPORATED AND SUBSIDIARIES
Item 2.
Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
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.
The
principal and accrued interest amounts due as of March 31, 2021 are
as indicated in the following table:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Subordinated
convertible debentures:
|
|
|
|
At
6%, due May 1992
|
$8,025
|
$28,478
|
|
|
|
|
|
Collateralized
convertible debentures-related party:
|
|
|
|
At
14%, due July 8, 1997
|
$-
|
$52,790
|
|
|
|
|
|
Notes
payable:
|
|
|
|
At
prime plus 2%, all past due
|
$1,176
|
$3,465
|
|
Non-interest
bearing
|
22
|
-
|
|
|
$1,198
|
$3,465
|
The
Company does not have sufficient funds available (after payment of,
or the reserving for the payment of, anticipated future operating
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.
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.
