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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, Missouri 63105

 (Address(Address of principal executive offices)

(314) 512-8650

(Registrant’s telephone number, including area code)

Inapplicable

 (Former(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 AugustMay 13, 2021,2022, 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 June 30, 2021March 31, 2022

Table of Contents

PART I FINANCIAL INFORMATION

Item 1. Financial Statements

PGI INCORPORATED AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (UNAUDITED) 

($ in thousands, except share and per share data)

See accompanying notes to Condensed Consolidated Financial Statements.

Part I Financial Information (Continued)

PGI INCORPORATED AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

($ in thousands, except per share data)

_____________________ 

*Considers the effect of dividends on preferred stock for the three and six months ended June 30, 2021March 31, 2022 and 2020.2021.                 

See accompanying notes to Condensed Consolidated Financial Statements.

Part I Financial Information (Continued)

PGI INCORPORATED AND SUBSIDIARIES 

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) 

($ in thousands) 

See accompanying notes to Condensed Consolidated Financial Statements.

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.

Part I Financial Information (Continued)

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. As an Inactive Registrant,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 2019, management concluded the Company is an Inactive Registrant and accordingly no longer engages an independent accountant for its SEC filings.

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 30 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-going administrative costs of the Company. The potential values of the land parcels held for sale havehas 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. CertainMany of these assets may be of so little value and marketability that the Company may electhas elected to not to pay the real estate taxes on selected parcels, which may eventually result in a de factodefacto 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 20202021 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 6, 7, 8, and 98 to the Company'sCompany’s consolidated financial statements for the year ended December 31, 2020,2021, 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 six months ended June 30, 2021March 31, 2022 are not necessarily indicative of operations to be expected for the fiscal year ending December 31, 20212022 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 six months ended June 30,March 31, 2022 and 2021 and 2020 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 six months ended June 30,March 31, 2022 and 2021, and 2020, 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 loss per share for the three and six months ended June 30, 2021March 31, 2022 and 2020.2021.

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 sixthree month periods ended June 30, 2021March 31, 2022 and 2020.March 31, 2021.

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:

(7)

At December 31, 2020,2021, the Company had an operating loss carryforward of approximately, $70,080,000available$69,349,000 available to reduce future taxable income. These operating losses expire at various dates through 2038.2040.

The following summarizes the temporary differences of the Company at June 30, 2021March 31, 2022 and December 31, 20202021 at the statutory rate:

(8)

The carrying amount of the Company’s financial instruments, other than debt, approximates fair value at June 30, 2021March 31, 2022 and December 31, 20202021 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 ownedwholly-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 ownedwholly-owned subsidiary of the Company, owns 11 parcels of real estate in Charlotte County, Florida, which in total approximates 58 acres. Theseacres, 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 meetsPGI met and continues to meet 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 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 conditions in Regulation S-X 3-11 for an “Inactive Registrant” which are:

PGI INCORPORATED AND SUBSIDIARIES

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

PGI has been ana SEC registrant for over 40 years. As the Company reviews its circumstances, it has met the conditions as an Inactive Registrant since 2017. As an Inactive Registrant, PGI anticipates it will continue to provide comprehensive updates through its SEC filings.

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$95.1 million as of December 31, 2020.2021. 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. PGI has been an SEC registrant for over 40 years.

As of June 30, 2021,March 31, 2022, the Company remained in default under its subordinated convertible debentures and notes payable, as well as the remaining balance of accrued interest with respect to its collateralized convertible debentures.

Results of Operations

Revenue for the three months ended June 30, 2021There was $14,000 compared to no revenue for the comparable 2020 period. Revenue for the three monthsmonth periods ended June 30, 2021 consisted of real estate sales of $10,000 due to the sale of an environmentally sensitive parcel of land for which the Company has no cost basisMarch 31, 2022 and $4,000 of other revenue received for a settlement claim from over 30 years ago when the Company was operating as a home builder.2021.

Expenses for the three month period ended June 30, 2021 decreasedMarch 31, 2022 increased by $7,000 when compared to the same period in 2020 as follows:

PGI INCORPORATED AND SUBSIDIARIES

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

Interest2021. This change reflects a $7,000 increase in interest expense relating to the Company’s outstanding debt, held by non-related parties, increased by $5,000 during the three month period ended June 30, 2021 compared to the same period in 2020.parties. 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 paspast 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 debenture holders.

Taxes and assessments expense increased by $1,000 during the three month period ended June 30, 2021 compared to the same period in 2020 due to the delayed payment or non-payment of real estate taxes in 2021. In 2020 the Company utilized early payment discounts for the real estate tax assessments.

Consulting and accounting related party expenses decreased by $3,000 during the three month period ended June 30, 2021 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 $5,000 during the three month period ended June 30, 2021 when compared to the same period in 2020 due to a $2,000 decrease in legal and professional fees relating to legal research for “going concern” alternatives and a $3,000 decrease relating to environmental remediation professional fees incurred in the three month period ended June 30, 2020.

General and administrative expenses during the three month period ended June 30, 2021 decreased by $5,000 when compared to the same period in 2020 due to expenses incurred for the Company’s tax return preparation incurred in the three month period ended June 30, 2020.

The Company incurred a net loss of $357,000$376,000 during the three month period ended June 30, 2021March 31, 2022 compared to a net loss of $378,000$369,000 for the comparable period in 2020.2021. After deducting preferred dividends, totaling $160,000 for the three month periods ended June 30,March 31, 2022 and 2021, and 2020, with respect to the Class A Preferred Stock, a net loss per share of $(.10) was incurred for the three month periods ended June 30,March 31, 2022 and 2021, and 2020, respectively. The total cumulative preferred dividends in arrears with respect to the Class A Preferred Stock through June 30, 2021March 31, 2022 is $16,755,000.

Revenue for the six months ended June 30, 2021 was $14,000 compared to no revenue for the comparable 2020 period. Revenue for the six months ended June 30, 2021 consisted of real estate sales of $10,000 due to the sale of an environmentally sensitive parcel of land for which the Company has no cost basis and $4,000 of other revenue received for a settlement claim from over 30 years ago when the Company was operating as a home builder.$17,235,000.

PGI INCORPORATED AND SUBSIDIARIES

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

Expenses forCash Flow Analysis

During the sixthree month period ended June 30, 2021March 31, 2022, the Company’s net cash used in operating activities was $13,000 compared to $17,000 for the comparable period in 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 $37,000 when$13,000 at March 31, 2022 compared to total assets at December 31, 2021, reflecting the same period in 2020 as follows:following changes:

Interest expense relating toDuring the Company’s current outstanding debt, held by non-related parties, increased by $6,000 during the sixthree month period ended June 30, 2021March 31, 2022, cash decreased by $13,000 compared to the same period in 2020. Interest expense relating to the Company’s outstanding debt for the 6% subordinated debentures, increased by $14,000 primarilyDecember 31, 2021 as a result of interest compounding on pas due balances. Interest expense relating to the 6.5% subordinated debentures decreased by $4,000Company paying 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 2020. The debentures were surrendered in 2020 with the escheatment to the respective statesan increase of 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 six month period ended June 30, 2021 compared to 3.84% for the same period in 2020.$363,000 of liabilities:

Taxes and assessments expense increased by $1,000 during the six month period ended June 30, 2021 compared to the same period in 2020 due to the delayed payment or non-payment of real estate taxes in 2021. In 2020 the Company utilized early payment discounts for the real estate tax assessments.

Consulting and accounting related party expenses decreased by $6,000 during the six month period ended June 30, 2021 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 $35,000 during the six month period ended June 30, 2021 when compared to the same period in 2020 due to decreases as follows:

PGI INCORPORATED AND SUBSIDIARIES

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

General and administrative expenses during the six month period ended June 30, 2021 decreased by $3,000 when compared to the same period in 2020 due to expenses incurred for the Company’s tax return preparation incurred in the six month period ended June 30, 2020.

The Company incurred a net loss of $726,000 during the six month period ended June 30, 2021 compared to a net loss of $777,000 for the comparable period in 2020. After deducting preferred dividends, totaling $320,000 for the six month periods ended June 30, 2021 and 2020, with respect to the Class A Preferred Stock, a net loss per share of $(.20) and $(.21) was incurred for the six month periods ended June 30, 2021 and 2020, respectively.

Cash Flow Analysis

During the sixthree month period ended June 30, 2021, the Company’s net cash used in operating activities was $17,000 compared to $75,000 for the comparable period in 2020. There was no cash provided by or used in financing or investing activities during the six month periods ended June 30, 2021 and 2020.

Analysis of Financial Condition

Total assets decreased by $17,000 at June 30, 2021 compared to total assets at DecemberMarch 31, 2020, reflecting the following changes:

During the six month period ended June 30, 2021, cash decreased by $17,000, compared to December 31, 2020 as a result of the Company funding its administrative costs.

PGI INCORPORATED AND SUBSIDIARIES

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

Liabilities were approximately $94,473,000 at June 30, 2022, compared to approximately $93,764,000 at December 31, 2020, reflecting the following changes which resulted in an increase of $507,000 of liabilities: