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    PGAI   US69331D1063

PGI INCORPORATED

(PGAI)
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PGI Incorporated : INC Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

05/14/2021 | 09:43am EDT

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.


                                       11


                       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.


                                       12


                       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:


                                                      (Decrease)


                                                      ($ in thousands)

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.


                                       13


                       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:


               March 31, December 31, Increase


               2021      2020         (Decrease)


               ($ in thousands)

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.


                                       14


                       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:


                                      March 31, December 31, Increase


                                      2021      2020         (Decrease)


                                      ($ in thousands)

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.


                                       15


                       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:


                                                     March 31, 2021


                                                     Principal  Accrued


                                                     Amount Due Interest


                                                     ($ in thousands)






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.


                                       16


                       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

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Financials (USD)
Sales 2020 0,00 M - -
Net income 2020 -1,11 M - -
Net Debt 2020 9,14 M - -
P/E ratio 2020 -0,03x
Yield 2020 -
Capitalization 0,11 M 0,11 M -
EV / Sales 2019 3 018x
EV / Sales 2020 4 601x
Nbr of Employees -
Free-Float 28,1%
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Managers and Directors
NameTitle
Laurence A. Schiffer Vice Chairman, President, CEO, CFO & CAO
Andrew S. Love Chairman & Secretary
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