LIQUIDITY AND CAPITAL RESOURCES
The liabilities of the Company exceed the reported value of its assets.
Management's efforts and activities have been, and continue to be, to sell
assets of the Company to repay its indebtedness and to pay the ordinary
administrative expenditures in keeping an inactive company in existence. The
aggregate remaining land inventory is less than 70 acres, consisting of multiple
parcels located in two Florida counties. These parcels have limited value
because of associated development constraints such as wetlands, easements and
other obstacles to development and sale. At December 31, 2020 the carrying value
of the land inventory was $14,000. The Company is seeking to realize full market
value for such land. However, certain land parcels 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 de facto liquidation of such
property by subjecting such property to a tax sale.
In management's judgment, the assets will be insufficient to satisfy much, if
any, of the outstanding indebtedness of the Company. Consequently, there is
substantial doubt about the Company's ability to continue as a "going concern,"
as that term is used for generally accepted accounting purposes. The asset
carrying values shown in the financial statements, are judged to be reasonable
estimates of the value, when viewed in the context of the entirety of the
financial statements.
In early 2019, the Board of Directors of PGI concluded that PGI met and
continues to meet all conditions under which a registrant may be deemed an
"Inactive Entity" as that term is defined or contemplated in Rule 3-11 of
Regulation S-X 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 Rule 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
Annual Reports on Forms 10-K with the SEC, including this Form 10-K, as well as
Quarterly Reports on Forms 10-Q and any other required reports. PGI currently
intends to include in such Annual Reports all annual consolidated financial
statements required to be included therein pursuant to Regulation S-X. 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 the year 2020. PGI
engaged Milhouse & Neal, a PCAOB registered public accounting firm, to review
its annual consolidated financial statements for its year ended December.
PGI meets all of the conditions in Rule 3-11 of Regulation S-X 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;
(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.
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.
6
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
As an Inactive Registrant, PGI currently intends to continue to provide
comprehensive updates through its SEC filings.
The Company's financial statement indebtedness includes its 6.0% subordinated
convertible debentures which matured in May, 1992, with a remaining face amount
of $8,025,000; and various notes payable, with a remaining face amount of
$1,198,000.
As of December 31, 2020 there was no remaining balance of the 6.5% subordinated
convertible debentures which matured in June 1991, with an original face amount
of $1,034,000. The Trustee of the 6.5% subordinated convertible debentures,
provided notice of final distribution to the holders of such debentures on
September 2, 2014. In connection with such final distribution, the Trustee
maintained a debenture reserve fund to be available for final distribution of
$92 per $1,000 in face amount to remaining holders of such debentures who
surrender their respective debenture certificates.
The remaining balance of the debenture reserve fund of $13,000 was disbursed in
escheatment to the states of the respective debenture holders during the year
ended December 31, 2020. The remaining debentures with a face amount of $138,000
were surrendered with the escheatment of respective funds to the states of the
debenture holders. Accordingly, the Company has recognized $125,000 in
forgiveness of debt during the year ended December 31, 2020. In addition,
accrued interest of $285,000 on such debentures that are considered surrendered
was recorded as forgiveness of interest expense during the year ended December
31, 2020. During the year ended December 31, 2019, there were no 6.5%
subordinated convertible debentures that were surrendered or escheated by their
respective debenture holders and no funds were utilized from the debenture
reserve account.
The 6.5% subordinated convertible debenture balances for the years ended
December 31, 2020 and 2019 are as follows:
2020 2019
($ in thousands)
Original face value $1,034 $1,034
Outstanding debenture principal balance - 138
Face value of debentures escheated 138 -
Accrued and unpaid interest balance - 279
Debenture reserve account balance - 13
Debenture reserve funds utilized
in escheatment to states of debenture holders 13 -
Forgiveness of debt 125 -
Forgiveness of interest 285 -
In addition to the convertible subordinated debentures noted above, the
Company's financial statement indebtedness includes its 6.0% subordinated
convertible debentures which matured in May, 1992, with a remaining face amount
of $8,025,000.
The cumulative amount due for the 6% subordinated convertible debentures which
matured in May 1992, includes the face amount of $8,025,000 plus accrued
interest of $28,137,000 as of December 31, 2020. The subordinated convertible
debentures have been in payment default for over twenty-five years. It is
unclear whether any action on behalf of the bondholders is presently likely,
given the negative net worth of the Company and continuing passage of time.
7
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
RESULTS OF OPERATIONS
Revenues
Revenues for the year ended December 31, 2020 decreased by $2,000 to $2,000
compared to revenues of $4,000 for the year ended December 31, 2019. Interest
income on the Company's money market account decreased by $1,000 during the year
ended December 31, 2020 from the comparable period in 2019 due to the declining
account balance. Other income decreased by $1,000 to $2,000 compared to other
income of $3,000 for the year ended December 31, 2019. Other income in both 2020
and 2019 represents recoveries of lot lien receivables which had been fully
provided for cancellation.
Costs and Expenses
Costs and expenses for the year ended December 31, 2020 decreased by $465,000
when compared to the same period in 2019 as follows:
Increase
2020 2019 (Decrease)
($ in thousands)
COSTS, EXPENSES AND OTHER
Interest expense $1,417 $1,412 $5
Forgiveness of Debt and Interest (410) - (410)
Taxes and assessments 5 5 -
Consulting and accounting-
related party 34 35 (1)
Legal and professional 36 65 (29)
General and administrative 25 55 (30)
$1,107 $1,572 $(465)Interest expense relating to the Company's current outstanding debt held by
non-related parties, increased by $5,000 during the year ended December 31, 2020
compared to the year ended December 31, 2019. Interest expense relating to the
Company's outstanding debt for subordinated convertible debentures, increased by
$26,000 during the year ended December 31, primarily as a result of interest
accruing on past due balances which increased at various intervals throughout
the year for accrued but unpaid interest. This increase was offset by a $21,000
decrease in interest expense for notes payable due to a decrease in the prime
interest rate to 3.25% as of December 31, 2020 compared to 4.75% as of December
31, 2019.
8
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
The Company recognized $410,000 in forgiveness of debt and accrued interest
during the year ended December 31, 2020. The Trustee of the 6.5% subordinated
convertible debentures, which matured in June, 1991, provided notice of final
distribution to the holders of such debentures on September 2, 2014. In
connection with such final distribution, the Trustee designated the remaining
balance of the debenture reserve fund held by the Trustee for final distribution
of $92 per $1,000 in face amount to holders of such debentures who surrender
their respective debenture certificates.
During the year ended December 31, 2020, the remaining balance of the reserve
fund of $13,000 was disbursed in escheatment to the states of the respective
debenture holders. The remaining debentures with a face amount of $138,000 were
surrendered with the escheatment of respective funds to the states of the
debenture holders. Accordingly, the Company has recognized $125,000 in
forgiveness of debt during the year ended December 31, 2020. In addition,
accrued interest of $285,000 on such debentures that are considered surrendered
was recorded as forgiveness of interest expense during the year ended December
31, 2020. There were no debentures surrendered or escheated in 2019 and no funds
were utilized from the debenture reserve account.
Taxes and assessments were $5,000 during the years ended December 31, 2020 and
2019.
Consulting and accounting expense was $34,000 and $35,000 for the years ended
December 31, 2020 and 2019, respectively. A quarterly consulting fee is paid to
Love Real Estate Company ("LREC"), an affiliate of LIC, of one-tenth of one
percent of the carrying value of the Company's assets, which decreased by $1,000
in 2020 compared to 2019 due to the decrease in the value of the Company's
assets. In addition, accounting service fees of $33,600 were paid to LREC in
2020 and 2019.
Legal and professional expenses decreased by $29,000 during the year ended
December 31, 2020 when compared to the same period in 2019 as follows:
Increase
(Decrease)
($ in thousands)
Legal common title matters $(10)
Legal and professional fees environmental remediation (9)
Legal Form 8K review
(4)
Legal review filing of periodic reports (6)
$(29)General and administrative expenses decreased by $30,000 during the year ended
December 31, 2020, compared to the year ended December 31, 2019, primarily as a
result of a reduction in accounting review services.
The net loss was $1,105,000 ($.33 per share loss) for the year ended December
31, 2020 compared to a net loss of $1,568,000 ($.42 per share loss) for the year
ended December 31, 2019. Included in the 2020 and 2019 loss per share
computation is $640,000 ($.12 per share of Common Stock) of annual cumulative
preferred stock dividends in arrears.
9
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
FINANCIAL CONDITION
Total assets decreased by $241,000 at December 31, 2020 compared to total assets
at December 31, 2019 reflecting the following changes:
2020 2019 Increase (Decrease)
($ in thousands)
Cash $81 $309 $(228)
Land inventory 14 14 -
Other assets - 13 (13)
$95 $336 $(241)Net cash used in operating activities was $228,000 for the year ended December
31, 2020 compared to cash used in operations of $217,000 for the year ended
December 31, 2019. Net cash used in operations consists of cash received from
operations less cash expended for operations.
Cash received from operations during the year ended December 31, 2020 was
$2,000, which representsmiscellaneous income from a recovery of a lot lien
receivable which had been fully provided for cancellation. Cash received from
operations in the year ended December 31, 2019 was $4,000, which represented
$1,000 in interest income earned on the Company's money market account and
$3,000 in miscellaneous income from a recovery of a lot lien receivable which
had been fully provided for cancellation.
Cash expended for operations during the year ended December 31, 2020 was
$230,000 which represents an increase of $9,000 compared to cash expended for
operations of $221,000 in the year ended December 31, 2019. There was an
increase of $125,000 in payments of interest for accrued related party interest
paid on collateralized debt. This increase is offset by decreases in cash
expended for operations during the year ended December 31, 2020 of $5,000 in
real estate taxes paid, a decrease of $52,000 in legal and professional
expenditures and a decrease of $59,000 in general and administrative
expenditures related to the filing of the Company's periodic reports in 2020 as
an inactive registrant.
10
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
The remaining balance of the debenture reserve fund of $13,000 was disbursed in
escheatment to the states of the respective debenture holders during the year
ended December 31, 2020. The remaining debentures with a face amount of $138,000
were surrendered with the escheatment of respective funds to the states of the
debenture holders.
Liabilities were $93,764,000 at December 31, 2020 compared to $92,900,000 at
December 31, 2019, reflecting the following changes:
Increase
2020 2019 (Decrease)
($ in thousands)
Accounts payable and accrued expenses $160 $169 $(9)
Accrued real estate taxes
4 - 4
Accrued interest 31,587 30,455 1,132
Accrued interest-related party 52,790 52,915 (125)
Notes payable 1,198 1,198 -
Convertible subordianted debentures payable 8,025 8,163 (138)
$93,764 $92,900 $864
Accounts payable and accrued expenses decreased by $9,000 at December 31, 2020,
compared to December 31, 2019, primarily representing current liabilities for
general and administrative expenses relating to the filing of the Company's
periodic reports as an inactive registrant.
Accrued real estate taxes increased by $4,000 at December 31, 2020 compared to
December 31, 2019 due to the accrual of real estate taxes for the year ended
December 31, 2020 that were not paid.
Accrued interest increased by $1,007,000 at December 31, 2020 compared to
December 31, 2019 reflecting changes in the following accrued interest
categories:
Increase
2020 2019 (Decrease)
($ in thousands)
Convertible subordinated debentures $28,137 $27,070 $1,067
Convertible debentures-related party 52,790 52,915 (125)
Notes Payable 3,450 3,385 65
$84,377 $83,370 $1,007
11
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
There was a net increase of accrued interest in the amount of $1,007,000 during
the year ended December 31, 2020. The increase in accrued interest of $1,067,000
relating to the convertible subordinated debentures represents interest expense
for the year ended December 31, 2020 of $1,352,000 less $285,000 in forgiveness
of interest relating to the 6.5% convertible subordinated debentures that were
escheated to the states of debenture holders in 2020. The accrued interest
relating to convertible subordinated debentures increased due to the additional
accrual of interest and no payment of previously accrued interest on the
Company's debentures (see Note 8 to the consolidated financial statements under
Item 8). The notes payable and convertible subordinated debentures, including
accrued interest, are past due.
The decrease in accrued interest of $125,000 for the related party convertible
debentures is due to the payment of accrued interest on the collateralized
convertible debentures during the year ended December 31, 2020. The remaining
balance of accrued interest on the collateralized convertible debentures is
$52,790,000.
The increase of $65,000 of accrued interest relating to the Company's other
outstanding debt represents interest expense for the year ended December 31,
2020. The notes payable and convertible subordinated debentures, including
accrued interest, are past due.
During the year ended December 31, 2020, 6.5% subordinated debentures with face
amount of $138,000 were surrendered with the escheatment of the respective
debenture reserve funds by the Trustee to the states of such debenture holders.
The Company's stockholders' deficiency increased to $93,669,000 at December 31,
2020 from a $92,594,000 stockholders' deficiency at December 31, 2019,
reflecting the 2020 net loss of $1,105,000.
Off-Balance Sheet Arrangements
The Company has no Off-Balance Sheet Arrangements.
Recent Accounting Standards
Accounting Standards Update (ASU) No. 2014-15, "Presentation of Financial
Statements - Going Concern (Subtopic 205-40): Disclosure of Uncertainties about
an Entity's Ability to Continue as a Going Concern", is effective for interim
and annual periods ending after December 15, 2016 and, accordingly, this is
discussed in Footnote 1 to the financial statements.
ASU No. 2014-09, "Revenue from Contracts with Customers (Topic 606)", is
effective for fiscal years beginning after December 15, 2017, and interim
periods within those fiscal years, and accordingly, this is discussed in
Footnote 2 to the financial statements.
Forward Looking Statements
The discussion set forth in this Item 7, as well as other portions of this Form
10-K, 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-K. When used in this Form 10-K,
words such as "anticipates," "estimates," "believes," "appears", "expects," and
similar expressions are intended to identify forward-looking statements but are
not the exclusive means of identifying such 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; the overall national economy and financial
markets; 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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