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 nine months ended September 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. 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 have not been 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.
12
Table of Contents
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 September 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
There was no revenue for the three month periods ended September 30, 2022 and
2021.
Expenses for the three month period ended September 30, 2022 increased by
$12,000 when compared to the same period in 2021 as follows:
Increase
(Decrease)
($ in thousands)
Interest $ 13
General and administrative (1 )
$ 12
Interest expense relating to the Company's outstanding debt, held by non-related
parties, increased by $13,000 during the three month period ended September 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 $7,000 primarily as a result of interest compounding on past due
balances. Interest expense for notes payable increased by $6,000 due to an
increase in the average prime interest rate to 5.35% for the three month period
ended September 30, 2022 compared to 3.25% for the same period in 2021.
13
Table of Contents
PGI INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
General and administrative expenses during the three month period ended
September 30, 2022 decreased by $1,000 when compared to the same period in 2021
due to expenses incurred in 2021 with listing the single family lots and the
seven acre parcel in Citrus County for sale. There was no such expenses in 2022.
The Company incurred a net loss of $388,000 during the three month period ended
September 30, 2022 compared to a net loss of $376,000 for the comparable period
in 2021. After deducting preferred dividends, totaling $160,000 for the three
month periods ended September 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 September 30, 2022 and 2021, respectively. The total cumulative
preferred dividends in arrears with respect to the Class A Preferred Stock
through September 30, 2022 is $17,555,000.
Revenue for the nine months ended September 30, 2022 was $38,000 from real
estate sales compared to revenue of $14,000 for the comparable 2021 period. The
2021 revenue consisted of real estate sales revenue of $10,000 and other revenue
of $4,000 from a settlement claim, of over 30 years, when the Company was
operating as a home builder. There was no other revenue for the nine months
ended September 30, 2022.
Expenses for the nine month period ended September 30, 2022 increased by $44,000
when compared to the same period in 2021 as follows:
Increase
(Decrease)
($ in thousands)
Cost of real estate sales $ 15
Interest 30
Taxes and Assessments (1 )
$ 44
The cost of real estate sales for the nine months ended September 30, 2022
increased by $15,000 compared to the nine months ended September 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 nine months ended September 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 $30,000 during the nine month period ended
September 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 $22,000 primarily as a result of interest compounding on past due
balances. Interest expense for notes payable increased by $8,000 due to an
increase in the prime interest rate of 6.25% as of September 30, 2022 compared
to 3.25% as of September 30, 2021.
14
Table of Contents
PGI INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Taxes and assessments expense decreased by $1,000 during the nine month period
ended September 30, 2022 compared to the same period in 2021 due to the sale of
real estate parcels in 2022 and 2021.
The Company incurred a net loss of $1,122,000 during the nine month period ended
September 30, 2022 compared to a net loss of $1,102,000 for the comparable
period in 2021. After deducting preferred dividends, totaling $480,000 for the
nine month periods ended September 30, 2022 and 2021, with respect to the Class
A Preferred Stock, a net loss per share of $(.30) was incurred for the nine
month periods ended September 30, 2022 and 2021, respectively.
Cash Flow Analysis
During the nine month period ended September 30, 2022, the Company's net cash
used in operating activities was $38,000 compared to $31,000 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 nine
month periods ended September 30, 2022 and 2021.
Analysis of Financial Condition
Total assets decreased by $48,000 at September 30, 2022 compared to total assets
at December 31, 2021, reflecting the following changes:
September 30, December 31,
2022 2021 (Decrease)
($ in thousands)
Cash $ 20 $ 58 $ (38 )
Land inventory - 10 (10 )
$ 20 $ 68 $ (48 )
During the nine month period ended September 30, 2022, cash decreased by
$38,000, compared to December 31, 2021. The Company realized sale proceeds
received of $38,000 from the sale of two lots and paid $30,000 to related
parties for accrued interest payable in connection with the collateralized
convertible debentures and cash expended of $46,000 for administrative costs.
Land inventory decreased by $10,000 during the first nine months of 2022 for the
two lots sold 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.
15
Table of Contents
PGI INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Liabilities were approximately $96,223,000 at September 30, 2022 compared to
approximately $95,149,000 at December 31, 2021, reflecting the following changes
which resulted in an increase of $1,074,000 of liabilities:
September 30, December 31, Increase
2022 2021 (Decrease)
($ in
thousands)
Accounts payable and accrued expenses $ 157 $ 157 $ -
Accrued real estate taxes 5 5 -
Accrued interest 86,838 85,764 1,074
Credit agreements: -
Notes payable 1,198 1,198 -
Subordinated convertible debentures
payable 8,025 8,025 -
$ 96,223 $ 95,149 $ 1,074
During the nine month period ended September 30, 2022, the amount of accrued
interest increased by $1,074,000 as a result of $1,104,000 of interest expense
for such period which was offset by the payment of $30,000 of accrued interest
for the collateralized convertible debentures which are held by related parties.
The Company remains in default on the entire principal amount plus interest of
its subordinated convertible debentures and notes payable as well as the
remaining accrued interest owed with respect to the collateralized convertible
debentures.
16
Table of Contents
PGI INCORPORATED AND SUBSIDIARIES
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
The principal and accrued interest amounts due as of September 30, 2022 are as
indicated in the following table:
September 30, 2022
Principal Accrued
Amount Due Interest
($ in thousands)
Subordinated convertible debentures:
At 6%, due May 1992 $ 8,025 $ 30,561
Collateralized convertible debentures-related party:
At 14%, due July 8, 1997
$ - $ 52,710
Notes payable:
At prime plus 2%, all past due $ 1,176 $ 3,567
Non-interest bearing 22 -
$ 1,198 $ 3,567
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.
17
Table of Contents
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.
© Edgar Online, source Glimpses