FORM 10- Q

U.S SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(Mark One)

Commission File Number 1-6471

212 SOUTH CENTRAL, SUITE 304, ST. LOUIS, MISSOURIMissouri 63105

(Address of principal executive offices)

(314) 512-8650

(Registrant’s telephone number, including area code)

Inapplicable

(Former Name, Former Address and Former Fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑☒ No ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑☒ No ☐

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. (Check one):

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 by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑ 

Securities registered pursuant to Section 12(b) of the Act:

Indicate the number of shares outstanding of each of the registrant'sregistrant’s classes of common stock, as of the latest practicable date: As of NovemberMay 13, 2017,2022, there were 5,317,758 shares of the registrant’s common stock, $.10 par value per share, outstanding.

PGI INCORPORATED AND SUBSIDIARIES

Form 10 – Q

For the Quarter Ended September 30, 2017

Table of Contents

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

Part I Financial Information (Continued)

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

Part I Financial Information (Continued)

See accompanying notes to Condensed Consolidated Financial Statements (unaudited).

Part I Financial Information (Continued)

PGI INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY (UNAUDITED)

Three Months ended March 31, 2022 

($ in thousands, except share data) 

Three Months ended March 31, 2021

($ in thousands, except share data)

See accompanying notes to Condensed Consolidated Financial Statements.

PGI INCORPORATED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (Unaudited)

The accompanying unaudited condensed consolidated financial statements of PGI Incorporated (“PGI”) and its subsidiaries (the “Company”) have been prepared in accordance with the instructions to Form 10 - Q and therefore do not include all disclosures necessary for fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. The Company'sCompany’s most recent audited financial statements are for the year ended December 31, 2018 and the year 2019 was reviewed by independent public accountants. For these years and for many years prior, the Company’s independent registered public accounting firm included an explanatory paragraph regarding the Company'sCompany’s ability to continue as a going concern in their opinion onconcern. In 2019, management concluded the Company's consolidated financial statementsCompany is an Inactive Registrant and accordingly no longer engages an independent accountant for the year ended December 31, 2016.

The Company was founded in 1958, and up until the mid 1990’s was in the business of building and selling homes, developing and selling home sites and selling undeveloped or partially developed tracts of land. Over approximately the last 2530 years, the Company’s business focus and emphasis changed substantially as it has concentrated its sales and marketing efforts almost exclusively on the disposition of its remaining real estate.

The Company’s major efforts and activities have been, and continue to be, to sell the remaining assets of the Company, to repay its indebtedness, and to pay the ordinary on-goingadministrative costs of operation of the Company. WhileThe potential values of the land parcels held for sale has been difficult to assess. The Company will seek to realize full market value for each remaining asset, the amounts realized may be at substantial variance from its present financial statement carrying value. Many of these assets may be of so little value and marketability that the Company has elected to not pay the real estate taxes on selected parcels, which may eventually result in a defacto liquidation of such property by subjecting such property to a tax sale. In management’s judgement, the remaining assets will be insufficient to satisfy much, if any, of the outstanding indebtedness and there will be no recoveries by the shareholders. Consequently, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.

Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K annual report for 20162021 filed with the Securities and Exchange Commission.

The Company remains in default under the indentures governing its unsecured subordinated debentures. (See Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations and Notes 8, 9,6, 7, and 108 to the Company'sCompany’s consolidated financial statements for the year ended December 31, 2016,2021, as contained in the Company'sCompany’s Annual Report on Form 10 - K).

All adjustments (consisting of only normal recurring accruals) necessary for fair presentation of financial position, results of operations and cash flows have been made. The results for the three and nine months ended September 30, 2017March 31, 2022 are not necessarily indicative of operations to be expected for the fiscal year ending December 31, 20172022 or any other interim period.

PGI INCORPORATED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

Basic per share amounts are computed by dividing net income (loss), after deducting current period dividends on the Company'sCompany’s preferred stock, by the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding for the three and nine months ended September 30, 2017March 31, 2022 and 20162021 was 5,317,758.

Diluted per share amounts are computed by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding, after adjusting for the estimated effect of the assumed conversion of all cumulative convertible preferred stock and outstanding convertible debentures, if dilutive, into shares of common stock. For the three and nine months ended September 30, 2017,March 31, 2022 and 2021, the assumed conversion of all outstanding convertible preferred stock and collateralized convertible debentures would have been anti-dilutive.

The following is a summary of the calculations used in computing basic and diluted income (loss)loss per share for the three and nine months ended September 30, 2017March 31, 2022 and 2016.

PGI INCORPORATED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

The Financial Accounting Standards Board Accounting Standards Codification Topic No. 230, “Statement of Cash Flows”, requires a statement of cash flows as part of a full set of financial statements. For quarterly reporting purposes, the Company has elected to condense the reporting of its net cash flows. There were no payments of interest for the ninethree month periodperiods ended September 30, 2017. Related party interest paid during the nine months ended September 30, 2016 was $5,925,000.

Land inventory consisted of

Accounts payable and accrued expenses consisted of:

PGI INCORPORATED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

Credit agreements consisted of the following:

At December 31, 2016,2021, the Company had an operating loss carryforward of approximately, $66,420,000$69,349,000 available to reduce future taxable income. These operating losses expire at various dates through 2035.

The following summarizes the temporary differences of the Company at September 30, 2017March 31, 2022 and December 31, 20162021 at the statutory rate:

The carrying amount of the Company’s financial instruments, other than debt, approximates fair value at September 30, 2017March 31, 2022 and December 31, 20162021 because of the short maturity of those instruments. It was not practicable to estimate the fair value of the Company’s notes payable and its convertible debentures because these debts are in default causing no basis for estimating value by reference to quoted market prices or current rates offered to the Company for debt of the same remaining maturities.

PGI INCORPORATED AND SUBSIDIARIES

Item 2. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations

Preliminary Note

The Company’s remaining land inventory consists of 6two 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 1211 parcels of real estate in Charlotte County, Florida, which in total approximates 6058 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 saleBoard of two undeveloped parcelsDirectors of real property consisting of 369 acres located in Hernando County, Florida (the “Property”) between Sugarmill WoodsPGI concluded that PGI met and the State of Florida Department of Transportation (the “Florida DOT”). The Property was encumbered by secured creditor claims, and the salecontinues to meet all of the Property closedconditions 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 June 21, 2016 for $9,000,000. The Florida DOT desiredForm 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 acquire the Property in connectioncontinue to timely file Quarterly Reports on Form 10-Q and Annual Reports on Form 10-K with the northward extensionSecurities 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 Suncoast Parkway as part of the Suncoast Parkway, Project 2.

PGI INCORPORATED AND SUBSIDIARIES

Item 2. Management'sManagement’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 September 30, 2017,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 monthsmonth periods ended September 30, 2017 increased by $6,000 to $7,000 from $1,000 for the comparable 2016 period primarily as a result of $6,000 interest earned on the Company’s short-term note receivable balance with LIC, the Company’s primary preferred shareholder.

Expenses for the three monthsmonth period ended September 30, 2017March 31, 2022 increased by $8,000$7,000 when compared to the same period in 2016.2021. 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 three month period ended September 30, 20176% subordinated convertible debentures, increased by $9,000 compared to the same period in 2016$7,000 primarily as a result of (i) interest accruingcompounding on past due balances which increase at various intervals throughout the year for accrued but unpaid interest, and (ii) an increase in interest rates in 2017.

The Company incurred a resultnet loss of an increase in real estate tax assessments in 2017. Consulting and accounting expense decreased by $1,000 during the three months ended September 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 LIC, of one-tenth of one percent of the carrying value of the Company’s assets which have decreased since the same period in 2016. Legal and professional expenses decreased by $2,000 during the three months ended September 30, 2017 when compared to the same period in 2016 due to additional legal expenses incurred in 2016 in connection with the filing of the Company’s periodic reports during the three months ended September 30, 2016. General and administrative expenses$376,000 during the three month period ended September 30, 2017 increased by $1,000 whenMarch 31, 2022 compared to the same period in 2016 primarily as a result of increased audit and tax service fees during the three month period ended September 30, 2017. As a result, a net loss of $366,000 was incurred$369,000 for the three months ended September 30, 2017 compared to net loss of $364,000 incurred for the three months ended September 30, 2016.comparable period in 2021. After deducting preferred dividends, totaling $160,000 for the three month periods ended September 30, 2017March 31, 2022 and 2016,2021, with respect to the Class A Preferred Stock, a net loss per share of $(.10) was incurred for both of the three month periods ended September 30, 2017March 31, 2022 and 2016.2021,respectively. The total cumulative preferred dividends in arrears with respect to the Class A Preferred Stock through September 30, 2017March 31, 2022 is $14,355,000.

PGI INCORPORATED AND SUBSIDIARIES

Item 2. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Cash Flow Analysis

During the ninethree month period ended September 30, 2017 decreased by $8,994,000March 31, 2022, the Company’s net cash used in operating activities was $13,000 compared to $9,000 from $9,003,000$17,000 for the comparable 2016 period primarilyin 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:

During the three month period ended March 31, 2022, cash decreased by $13,000 compared to December 31, 2021 as a result of the sale by Sugarmill Woods in 2016 of the Property to the Florida DOT for $9 million. Related party interest income increased by $5,000 during the nine months ended September 30, 2017 to $7,000 from $2,000 for the comparable period in 2016. The related party interest income for the nine month period ended September 30, 2017 is a result of the Company’s investment in a $560,000 short term note with LIC, which investment was made during the nine month period ended September 30, 2017. The Company received payment of the previous note receivable from LIC on June 23, 2016. Interest income on the Company’s money market account increased by $1,000 during the nine months ended September 30, 2017paying its administrative costs.

Liabilities were $95,512,000 at March 31, 2022 compared to $95,149,000 at December 31, 2021, reflecting the same periodfollowing changes which resulted in 2016.

PGI INCORPORATED AND SUBSIDIARIES

Item 2. Management'sManagement’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

During the estimated 2016 Alternative Minimum Tax on the 2016 gain on sales of real estate. Estimated recoverable income taxes as of September 30, 2017 is $18,000 and the Company recognized an income tax expense of $57,000 during the ninethree month period ended September 30, 2017. As a result, a net loss of $1,188,000 was incurred for the nine month period ended September 30, 2017 compared to net income of $3,330,000 for the comparable period in 2016. After deducting preferred dividends, totaling $480,000 for the nine month periods ended September 30, 2017 and 2016, with respect to the Class A Preferred Stock, net income (loss) per share of $(.31) and $.54 was incurred for the nine month periods ended September 30, 2017 and 2016, respectively.

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 September 30, 2017March 31, 2022 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’sCompany has discontinued the services of independent registered public accounting firmfirms 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 opinionreports on the Company’s consolidated financial statements for the year ended December 31, 2016.

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.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4. Controls and Procedures

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 September 30, 2017.March 31, 2022. There have been no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2017March 31, 2022 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PGI INCORPORATED AND SUBSIDIARIES

PART II OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

Not applicable.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

Item 3. Defaults Upon Senior Securities

See discussion in Item 2 of Part I with respect to defaults under the Company'sCompany’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.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

Not applicable.

Item 6. Exhibits

Reference is made to the Exhibit Index hereof for a list of exhibits filed or furnished under this Item.

PGI INCORPORATED AND SUBSIDIARIES

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.

PGI INCORPORATED AND SUBSIDIARIES

EXHIBIT INDEX

* Furnished with this report.