Preliminary Note
The Company's remaining land inventory consists of two 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"). Subsequent to March 31,
2022, the two single family lots were sold and PGI realized approximately
$38,000. 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, 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 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 a 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 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 $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. Subsequent to March 31, 2022 two single family lots were sold and PGI
realized approximately $38,000. 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 March 31, 2022, 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.
Results of Operations
There was no revenue for the three month periods ended March 31, 2022 and 2021.
Expenses for the three month period ended March 31, 2022 increased by $7,000
when compared to the same period in 2021. This change reflects a $7,000 increase
in interest expense relating to the Company's outstanding debt, held by
non-related parties. 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.
The Company incurred a net loss of $376,000 during the three month period ended
March 31, 2022 compared to a net loss of $369,000 for the comparable period in
2021. After deducting preferred dividends, totaling $160,000 for the three month
periods ended March 31, 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 March 31, 2022 and 2021,respectively. The total cumulative preferred
dividends in arrears with respect to the Class A Preferred Stock through March
31, 2022 is $17,235,000.
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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 three month period ended March 31, 2022, the Company's net cash used
in operating activities was $13,000 compared to $17,000 for the comparable
period in 2021. There was no cash provided from financing or investing
activities during the three month periods ended March 31, 2022 and 2021.
Analysis of Financial Condition
Total assets decreased by $13,000 at March 31, 2022 compared to total assets at
December 31, 2021, reflecting the following changes:
March 31, December 31, Increase
2022 2021 (Decrease)
($ in thousands)
Cash $ 45 $ 58 $ (13 )
Land inventory 10 10 -
$ 55 $ 68 $ (13 )
During the three month period ended March 31, 2022, cash decreased by $13,000
compared to December 31, 2021 as a result of the Company paying its
administrative costs.
Liabilities were $95,512,000 at March 31, 2022 compared to $95,149,000 at
December 31, 2021, reflecting the following changes which resulted in an
increase of $363,000 of liabilities:
March 31, December 31, Increase
2022 2021 (Decrease)
($ in
thousands)
Accrued expenses $ 158 $ 157 $ 1
Accrued real estate taxes 4 5 (1 )
Accrued interest 86,127 85,764 363
Credit agreements:
Notes payable 1,198 1,198 -
Subordinated convertible debentures
payable 8,025 8,025 -
$ 95,512 $ 95,149 $ 363
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PGI INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
During the three month period ended March 31, 2022, the amount of accrued
expenses increased by $1,000 primarily due to the accrual of income tax
preparation expense for the respective period. Accrued real estate taxes
decreased by $1,000 during the three month period ended March 31, 2022 due to
the payment of a portion of the 2021 accrued real estate taxes in the three
month period ended March 31, 2022 and the accrual of real estate taxes for the
respective period. Accrued interest during the three month period ended March
31, 2022 increased by $363,000 due to the amount of interest expense for such
period. During the three month period ended March 31, 2022, the Company made no
interest or principal payments on its outstanding notes payable and subordinated
convertible debentures.
The Company remains in default on the entire principal amount plus interest of
its subordinated convertible debentures and notes payable as well as the
remaining accrued interest owed with respect to the collateralized convertible
debentures.
The principal and accrued interest amounts due as of March 31, 2022 are as
indicated in the following table:
March 31, 2022
Principal Accrued
Amount Due Interest
($ in thousands)
Subordinated convertible debentures:
At 6%, due May 1992 $ 8,025 $ 29,860
Collateralized convertible debentures-related party:
At 14%, due July 8, 1997
$ - $ 52,740
Notes payable:
At prime plus 2%, all past due $ 1,176 $ 3,527
Non-interest bearing 22 -
$ 1,198 $ 3,527
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. Subsequent to March 31, 2022, the Company sold two single family lots
and realized approximately, $38,000.
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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