For the transition period from ___________________ to _____________________

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: As of May 15,August 14, 2017, there were 5,317,758 shares of the registrant’s common stock, $.10 par value per share, outstanding.

Item 1. Financial Statements

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 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.

On June 17, 2016 two contracts were executed for the sale of two undeveloped parcels of real property consisting of 369 acres located in Hernando County, Florida (the “Property”) between Sugarmill Woods and the State of Florida Department of Transportation (the “Florida DOT”). The Property was encumbered by secured creditor claims, and the sale of the Property closed on June 21, 2016 for $9,000,000. The Florida DOT desired to acquire the Property in connection with the northward extension of the Suncoast Parkway as part of the Suncoast Parkway, Project 2.

The proceeds from the sale of the Property of $9,000,000 were received on June 23, 2016 and payment of the primary lender debt obligation totaling $500,000 in outstanding principal, and all accrued interest payable related to thesuch debt totaling $470,000, was made to PGIP LLC “(PGIP”), the holder of the first mortgage note and an affiliate of the Company. In addition, on June 23, 2016, the remaining outstanding principal of the collateralized convertible debentures totaling $1,500,000 and a portion of the accrued interest related to such debentures totaling $5,455,000 was paid to the current holders of such debentures. Love Investment Company (“LIC”), and Love-1989 Florida Partners, LP (“Love-1989”), each affiliates of Love-PGI Partners, L.P. (“L-PGI”), held such collateralized convertible debentures. Prior to December 31, 2016, L-PGI was the Company’s primary preferred stock shareholder. Effective December 31, 2016, L-PGI liquidated and assigned the 2,260,760 shares of common stock of the Company and 1,875,000 shares of preferred stock of the Company that were held by L-PGI to LIC in conjunction with settling its remaining indebtedness.

During the threesix month period ended March 31,June 30, 2017 and the year ended December 31, 2016, there were no 6.5% subordinated convertible debentures that were surrendered by their respective debenture holders and no funds were utilized from the debenture reserve account.

As of March 31,June 30, 2017 and December 31, 2016 the remaining outstanding principal balance on such 6.5% subordinated convertible debentures that have not been surrendered by the respective holders equals $447,000 plus accrued and unpaid interest of $824,000$831,000 and $817,000, respectively. If and when such remaining debentures are surrendered to the Trustee, the applicable portion of such principal and accrued interest will be recorded as debt and interest forgiveness. As the Company has consistently stated in prior filings, the Company believes that any potential claims by the respective debenture holders on such 6.5% subordinated convertible debentures would be barred under the applicable statutes of limitations.

As of March 31,June 30, 2017, 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.

Revenues for eachthe three months ended June 30, 2017 decreased by $9,000,000 to $1,000 from $9,001,000 for the comparable 2016 period primarily as a result of the three month period ended March 31, 2017 andsale by Sugarmill Woods of the Property to the Florida DOT on June 21, 2016 was $1,000.for $9 million. Interest income for the three month periodperiods ended March 31,June 30, 2017 and 2016 represents interest earned on the Company’s money market account. Interest income for the three month period ended March 31, 2016 represents related party interest on the short-term note receivable balance with LIC. The Company received payment ofLIC, the note receivable balance from LIC on June 23, 2016.Company’s primary preferred shareholder.

Expenses for the three months ended March 31,June 30, 2017 decreased by $1,944,000$2,597,000 when compared to the same period in 2016. The cost of real estate sales and expenses of sale for the three month period ended June 30, 2017 decreased by $745,000 compared to the three month period ended June 30, 2016, primarilysolely as a result of a decreasecosts and expenses incurred in interestconnection with the Property sale on June 21, 2016. There was no such expense duringfor the three months ended March 31,comparable period in 2017. Interest expense for the three month period ended March 31,June 30, 2017 decreased by $1,965,000$1,850,000 compared to the same period in 2016. There was no interest expense-related party during the three month period ended March 31,June 30, 2017 compared to interest expense-related party of $1,973,000$1,859,000 during the same period in 2016. During June 2016, proceedsProceeds from the Property sale were used by the Company on June 23, 2016 to repay the entire outstanding principal of the primary lender debt of $500,000, which was held by PGIP, and the entire outstanding principal of the collateralized convertible debenture of $1,500,000, which was held by LIC and Love-1989. With the full repayment of such principal, no additional interest expense was accrued with respect to such debentures subsequent to June 23, 2016.

Taxes and assessments expense decreased by $1,000$2,000 during the threesix month period ended March 31,June 30, 2017 when compared to the same period in 2016 as a result of lower real estate tax expense during the threesix month period ended March 31,June 30, 2017 due to the sale of Property sold to the Florida DOT on June 21, 2016. Consulting and accounting-related party expenses increased by $1,000 during the threesix month period ended March 31,June 30, 2017 when compared to the same period in 2016. A quarterly consulting fee is paid to Love Real Estate Company (“LREC”), an affiliate of L-PGI,LIC, of one-tenth of one percent of the carrying value of the Company’s assets which increased effective June 21, 2016 with the sale of Property to the Florida DOT, which resulted in the increase in such consulting and accounting expenses during the threesix month period ended March 31,June 30, 2017.

Legal and professional expenses during the threesix month period ended March 31,June 30, 2017 increased by approximately $16,000$14,000 when compared to the same period in 2016, primarily as a result of expenses incurred on a parcel in Citrus County requiring additional environmental remediation during the threesix month period ended March 31,June 30, 2017. General and administrative expenses during the threesix month period ended March 31,June 30, 2017 increased by $5,000$6,000 when compared to the same period in 2016 primarily as a result of increased audit and tax service fees during the threesix month period ended March 31,June 30, 2017.

The Company accruedpaid a Federal income tax deposit of $75,000 on April 18, 2017 for the estimated 2016 Alternative Minimum Tax on the 2016 gain on sales of real estate. Estimated recoverable income taxes as of June 30, 2017 is $18,000 and the Company recognized an income tax expense of $57,000 during the threesix month period ended March 31,June 30, 2017. As a result, a net loss of $449,000$822,000 was incurred for the threesix month period ended March 31,June 30, 2017 compared to a net lossincome of $2,336,000$3,694,000 for the comparable period in 2016. After deducting preferred dividends, totaling $160,000$320,000 for the threesix month periods ended March 31,June 30, 2017 and 2016, , with respect to the Class A Preferred Stock, a net lossincome (loss) per share of $(.11)$(.21) and $(.47)$.63 was incurred for the threesix month periods ended March 31,June 30, 2017 and 2016. The total cumulative preferred dividends in arrears with respect to the Class A Preferred Stock through March 31, 2017 is $14,035,000.2016, respectively.

During the threesix month period ended March 31,June 30, 2017, the Company’s net cash used in operating activities was $64,000$213,000 compared to $29,000cash provided by operating activities of $2,887,000 for the comparable period in 2016. There was no2016, reflecting the net effect of the $9 million received in the sale of Property to the Florida DOT and $5,925,000 of accrued interest paid on collateralized debt. Net cash provided fromused in investing activities during the threesix months ended June 30, 2017, consisted of a $500,000 short-term loan to LIC, the Company’s primary preferred shareholder, bearing interest at 4.5% per annum and to be repaid by December 31, 2017. During the six months ended June 30, 2016, the Company received $178,000 in payment of the note receivable principal from LIC and the restricted cash of $5,000 from PGIP, the first mortgage lender, which was released with the sale of Property and satisfaction of the primary lender debt obligation owed to PGIP. Net cash used in financing activities for the six month period ended March 31, 2017 compared to $29,000June 30, 2016 was for the repayment of net cash provided from investing activities in the comparable period in 2016 which consisted$2 million of note receivable proceeds received from LIC.related party primary lender debt and related party collateralized convertible debentures.

Total assets decreased by $64,000$194,000 at March 31,June 30, 2017 compared to total assets at December 31, 2016, reflecting the following changes:

 

 

During the threesix month period ended March 31,June 30, 2017, cash decreased by $64,000$713,000 compared to December 31, 2016, primarily as a result of the Company$500,000  short-term loan to LIC which bears interest of 4.5% per annum and matures on December 31, 2017, and funding itsof the Company’s operating activities.

Liabilities were approximately $90,093,000$90,336,000 at March 31,June 30, 2017 compared to approximately $89,708,000 at December 31, 2016, reflecting the following changes which resulted in a decreasean increase of $385,000$628,000 of liabilities:

During the threesix month period ended March 31,June 30, 2017, the amount of accounts payable and accrued expenses decreased by $5,000$46,000 primarily as a result of timing differences. Accrued real estate taxes decreased by $3,000$2,000 during the threesix month period ended March 31,June 30, 2017 due to the payment of previously accrued taxes. Accrued income taxesinterest during the threesix month period ended March 31,June 30, 2017 increased by $57,000. Income tax of $57,000 was accrued at March 31, 2017 for the estimated Alternative Minimum Tax on the gain on sale of the Property during 2016. Accrued interest during the three month period ended March 31, 2017 increased by $336,000$676,000 due to the amount of interest expense for such period. During the threesix month period ended March 31,June 30, 2017, 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 (including certain sinking fund and interest payments with respect to the subordinated convertible debentures) 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,June 30, 2017 are as indicated in the following table:

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’s independent registered public accounting firm included an explanatory paragraph regarding the Company’s ability to continue as a going concern in their opinion on the Company’s consolidated financial statements for the year ended December 31, 2016.

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.

Not applicable.

The Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures under the supervision and with the participation of its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based on this evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of March 31,June 30, 2017. There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31,June 30, 2017 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

The Company, to its knowledge, currently is not a party to any material legal proceedings.

Not applicable.

Not applicable.

See discussion in Item 2 of Part I with respect to defaults under the Company's subordinated convertible debentures, collateralized convertible debentures and other indebtedness and with respect to cumulative preferred dividends in arrears, which discussions are incorporated herein by this reference.

Not applicable.

Not applicable.

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.