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.

The Board of Directors of PGI has 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.

The Trustee of the 6.5% subordinated convertible debentures, which matured in June 1991, with an original face amount of $1,034,000, provided notice of final distribution to holders of such debentures on September 2, 2014. In connection with such final distribution, the Trustee maintains a debenture reserve fund with a balance of $13,000 and $41,000 as of SeptemberJune 30, 20182019 and December 31, 2017,2018, respectively, available for final distribution of $92 per $1,000 in face amount to holders of such debentures who surrender their respective debenture certificates.

During the ninesix month period ended SeptemberJune 30, 2018, $28,000 of2019, 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 funds were utilized with $2,000 disbursed in final distribution to debenture holders and $26,000 disbursed in escheatment to states of respective debenture holders as debentures with a face amount of $22,000 were surrendered by debenture holders and $287,000 in face amount of debentures were effectively surrendered with the escheatment of respective funds to the states of debenture holders. Accordingly, the Company has recognized $281,000 in forgiveness of debt during the nine months ended September 30, 2018. In addition, accrued interest of $594,000 on such debentures that are considered surrendered was recorded as forgiveness of interest expense during the nine months ended September 30, 2018. There were no debentures surrendered or escheated in 2017.account.

As of SeptemberJune 30, 2019 and December 31, 2018, the remaining outstanding principal balance on such 6.5% subordinated convertible debentures that werehave not been surrendered by the respective holders, or escheated by the Trustee to the states of residence of the respective holders equals $138,000 plus accrued and unpaid interest of $268,000.$275,000 and $270,000, respectively. If and when such remaining debentures are surrendered to the Trustee, or escheated to the states of residence of the respective debenture holders, the applicable portion of such principal and accrued interest will be recorded as debt and accrued 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 SeptemberJune 30, 2018,2019, 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.

 

Liabilities were approximately $91,227,000$92,199,000 at SeptemberJune 30, 20182019 compared to approximately $91,048,000$91,549,000 at December 31, 2017,2018, reflecting the following changes which resulted in an increase of $179,000$650,000 of liabilities:

During the ninesix month period ended SeptemberJune 30, 2018,2019, the amount of accounts payable and accrued expenses increaseddecreased by $44,000$55,000 primarily as a result of timing differences. In addition, the Company’s general and administrative expenses have decreased in 2019 as an inactive registrant. Accrued real estate taxes decreasedincreased by $1,000$2,000 during the ninesix month period ended SeptemberJune 30, 20182019 due to the paymentaccrual of previously accrued taxes.real estate taxes for the respective period. Accrued interest during the ninesix month period ended SeptemberJune 30, 20182019 increased by $445,000 as a result of $1,039,000 of interest expense for such period which was offset by accrued interest in$703,000 due to the amount of $594,000 on the 6.5% subordinated convertible debentures that have been surrendered by debenture holders or effectively surrendered by escheatment of the respective debenture reserve funds and recorded as forgiveness of interest expense.for such period. During the ninesix month period ended SeptemberJune 30, 2018,2019, 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 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, 2017.2018.

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.

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 SeptemberJune 30, 2018.2019. There have been no changes in the Company’s internal control over financial reporting during the quarter ended SeptemberJune 30, 20182019 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

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.