<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1995
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[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-6471
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PGI INCORPORATED
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(Exact name of Registrant as specified in its charter)
Florida 59-0867335
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(State or other jurisdiction of (IRS Employer Ident. No.)
incorporation or organization)
515 Olive Street, Suite 1400, St. Louis, Missouri 63101
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (314) 982-0780
--------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each Exchange
Title of Each Class on which Registered
- ------------------------------------- ------------------------------------
None None
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $.10 per share
6% Convertible Subordinated Debentures due 1992
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.
X Yes No
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Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-B is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-KSB or any
amendments to this Form 10-KSB. [X]
The aggregate market value of voting stock held by non-affiliates of the
registrant can not be determined. See page 10 of Form 10-KSB.
Indicate the number of shares outstanding of each of the Registrant's
classes of common stock as of March 25, 1996.
Common Stock $.10 par value, 3,317,555 shares outstanding.
The Index to Exhibits is located on pages 59 to 64 of this report.
Page 1 of 68 pages
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<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
FORM 10-KSB - 1995
Contents and Cross Reference Index
<CAPTION>
Part Item Form 10-KSB
No. No. Description Page No.
- --- --- ----------- --------
<C> <C> <S> <C>
I 1 Business
General 3
Description of Business 3-4
Industry Segments 4
Sales and Marketing 4-5
Homesite Sales
Contracts Receivable and Cancellation Policy 5-6
Land Inventory 7
Competition 7
Engineering and Development 7
Regulation and Environmental Matters 7-9
Executive Officers of the Registrant 9
2 Properties 9-10
3 Legal Proceedings 10
4 Submission of Matters to a Vote of Security Holders 10
II 5 Market for Registrant's Common Equity and
Related Stockholder Matters 10
6 Management's Discussion and Analysis or Plan
of Operation 11-23
7 Financial Statements and Supplementary Data 24
8 Disagreements on Accounting and
Financial Disclosure 46
III 9 Directors and Executive Officers of The Registrant 48-49
10 Executive Compensation 49-50
11 Security Ownership of Certain Beneficial Owners
and Management 50-52
12 Certain Relationships and Related Transactions 52-54
IV 13 Exhibits, Financial Statement Schedules and
Reports on Form 8-K 55
Signatures and Power of Attorney 57-58
Exhibit Index 59-64
</TABLE>
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<PAGE> 3
PART I
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Item 1. Business
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GENERAL
As used in this Annual Report on Form 10-KSB, the "Company" refers, unless
the context otherwise requires, to PGI Incorporated and its subsidiaries.
The Company's offices are at 8120 South Suncoast Boulevard, Homosassa,
Florida 34446 and its executive offices are located at 515 Olive Street,
Suite 1400, St. Louis, Missouri 63101, and its telephone number is (314)
982-0780.
The Company, founded in 1958, engages in the business of building and
selling homes, developing and selling homesites and selling undeveloped or
partially developed tracts of land.
The Company sells homes and homesites for cash. Substantially all of the
real estate sold or presently offered for sale by the Company is situated
within Sugarmill Woods, one of its planned communities in west central
Florida. Homesites are offered for sale at an office located within
Sugarmill Woods.
The Company obligated itself to develop its platted homesites by specified
dates in its offering statements and property reports filed with various
governmental agencies. Development of homesites includes grading, installing
streets and drainage, and where applicable, water distribution systems,
sewage collection and treatment systems, seawalls, waterways, common grounds
or other amenities. The Company has completed the development obligations
for all sold homesites. Land and improvement inventories are reported in the
Company's financial statements at the lower of historical cost or estimated
market value.
As of January 1, 1996 the Company employed a total of 7 persons of which 4
are on a full-time basis.
DESCRIPTION OF BUSINESS
Overview of Company Communities
- -------------------------------
Although the Company has developed several thousand lots in southwest
Florida during its 37-year history, its current community development
activities are located in Citrus County, Florida, in the community of
Sugarmill Woods.
Sugarmill Woods is located five miles south of Homosassa Springs and 60
miles north of Tampa. The Sugarmill Woods area consists of rolling hills
covered by cypress, oak and pine trees. Sugarmill Woods lies within the
"Nature Coast" area which offers both fresh and salt water fishing and
hunting in a state forest. There are public beaches, picnic areas and
fishing and camping facilities in
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<PAGE> 4
Overview of Company Communities (continued)
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the immediate vicinity. Several rivers in the area provide access
to the Gulf of Mexico. Sugarmill Woods is located on U.S. 19; U.S. 98 runs
diagonally through its southern portion. Single family homesites in
Sugarmill Woods generally range in size from 10,000 to 24,000 square feet.
Sugarmill Woods commenced sales operations in 1974. The subdivision is
platted into 20,550 homesites, and as of December 31, 1995 the Company
retained ownership of approximately 4,800 acres of undeveloped land or 7,236
undeveloped lots and 740 acres of undeveloped commercial property.
In July 1992 the Company sold the remainder of its then developed Sugarmill
Woods homesite inventory to its primary bank lender (the Secured Lender
Transaction, see Item 6 and Note 2 to the consolidated financial statements
under Item 7).
In April of 1994 the Company sold the remainder of its developed Southern
Woods inventory to its primary lender (the Second Secured Lender Transaction,
see Item 6 and Note 2 to the consolidated financial statements under Item 7).
All Sugarmill Woods homesites are subject to restrictive covenants,
including minimum building requirements, which are designed to ensure that
the homes are of high quality and well maintained. In addition to the
restrictive covenants, local governmental entities have established zoning
regulations which stipulate minimum allowance setbacks, square footage and
lot sizes, and also require adherence to land use policies.
INDUSTRY SEGMENTS
Although in prior years the Company has operated various amenities in
support of community development activities, the Company is currently in one
dominant industry segment--community development.
SALES AND MARKETING
The focus of the Company's ongoing sales operations has been and will be
concentrated at its Sugarmill Woods project.
The Company in the past offered resale homesites for sale only at an
on-site location. Direct mail, newspapers, magazines, radio, television and
highway signboards are utilized to advertise its homesites and homes. Sales
are generated by 6 independent contractors.
In mid-1990 the Company decided to concentrate on rebuilding an off-site
broker network to market its Sugarmill Woods developed
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<PAGE> 5
SALES AND MARKETING (Continued)
inventory. The Company executed non-exclusive broker agreements
with master brokers located in 16 states and one master broker with sales
forces in the Netherlands, Germany, Britain, Belgium, Switzerland and France.
With the sale of its developed homesite inventory, the off-site program was
terminated in July 1992. The Company is continuing its marketing efforts to
sell two of the undeveloped, platted Sugarmill Woods Villages comprising
approximately 4,800 acres in bulk. These villages represent approximately
7,236 undeveloped lots.
HOMESITE SALES CONTRACTS RECEIVABLE AND CANCELLATION POLICY
Historically, substantially all of the Company's homesite sales were made
pursuant to agreement for deed installment sales contracts whereby the
Company retained title to the homesite until the contract was paid in full.
However, during mid-1990 the Company, in anticipation of requirements from
the regulatory agencies, changed to selling under a deed, note and mortgage.
The deed, note and mortgage program conveys title to the purchaser within 60
days from the sale date, which the Company considers to be positive from a
marketing viewpoint. However, should the purchaser default on the mortgage
terms it will be necessary for the Company to go through statutorily required
foreclosure proceedings at a considerably greater expense than incurred in
cancellation of an agreement for deed. Since the Company cannot reasonably
estimate the increase in such foreclosure costs, no provision is made related
to these sales. The Company does not conduct a credit investigation of its
purchasers because homesite purchasers have no personal liability and the
Company is not entitled to a personal or deficiency judgment against the
purchaser.
While engaged in installment sales, the Company offered lots for sale to
residents of the United States for a 10% down-payment, 10% interest,
principal and interest payable over 10 years. Sales to residents of foreign
countries require a 20% down payment, 8.5% interest payable over 10 years.
For sales prior to 1990, the Company provided for losses on future
cancellations of contracts receivable on homesite sales by charges to income
sufficient, in the opinion of management, to maintain an adequate allowance
for such losses. The charge was based on historical collection experience
and analysis of delinquencies. Contract receivable balances related to
cancelled contracts are charged to the allowance for cancellations.
Contractually, for sales prior to implementation of the deed, note and
mortgage, the Company may cancel a contract after the following delinquency
periods:
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<PAGE> 6
HOMESITE SALES CONTRACTS RECEIVABLE AND CANCELLATION POLICY
(Continued)
<TABLE>
<CAPTION>
Percent of Contract Delinquency
Price Collected Period
---------------- ---------------
<S> <C>
Less than 25% 90 days
25% but less than 50% 120 days
50% and over 150 days
</TABLE>
Effective January 1, 1990, the Company adopted the installment method of
profit recognition for all homesite sales. The installment method defers a
portion of the gross profit at point of sale and recognizes the deferred
profit as principal payments on contracts are received (see Item 6 and Note
3 to the consolidated financial statements under Item 7).
The mortgage deed currently being utilized has a 30 day grace period with
notice provision for delinquent payments. Upon expiration of the 30 days the
unpaid balance of the mortgage may be accelerated by the Company. Monies
paid by the purchaser may be retained by the Company as liquidated damages.
The Company generally considers a contract delinquent if the scheduled
installment payment is over 30 days past due. Although the Company has no
formal policy for granting payment extensions, extensions have been granted
in certain instances. The following table sets forth delinquency information
with respect to homesite contracts receivable as of December 31, 1995:
<TABLE>
<CAPTION>
December 31, Percent of
1995 Total
---- ------
Contracts
- ---------
($ in thousands)
<S> <C> <C>
Current $ 741 46.3%
---------------- --------
31 days to 60 days delinquent 91 5.7
61 days to 90 days delinquent 38 2.4
Over 90 days 729 45.6
---------------- --------
Total delinquency 858 53.7
---------------- --------
Total contracts $ 1,599 100.0%
================ ========
</TABLE>
With the July 1992 Secured Lender Transaction (see Item 6 and Note 2 to the
consolidated financial statements under Item 7), the Company has sold all of
its contracts receivable. The Secured Lender Transaction was without
recourse. However, in prior years the Company sold or exchanged receivables
on real estate sales. The receivables were sold or exchanged with recourse
to the Company if a receivable becomes more than 90 to 120 days delinquent
(see Note 17 to the consolidated financial statements under Item 7).
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<PAGE> 7
LAND INVENTORY
The Company believes its land inventory is adequate to support its
community development activities and intends to offer for sale all or a
portion of approximately 5,400 acres of its unimproved Citrus County land
inventory.
COMPETITION
The Company's business is highly competitive. The Company competes
primarily on the basis of location and quality of its homesites and homes,
and the quality of related amenities. A large supply of homesites and other
subdivided land in Florida and other states is being offered for sale. There
are several land development companies, some of which have greater sales and
financial resources than the Company, operating in the same counties as the
Company. In the sale of homes, the Company competes with many local builders
and contractors and with several major building companies, some of which have
greater sales and financial resources than the Company.
Adverse market conditions resulting from general or local economic
conditions, increased raw material and labor costs, increased interest rates,
over-building, increased regulation and the availability of acceptable
mortgage financing, all of which are beyond the control of the Company, may
individually or collectively have a material adverse effect on the Company's
business.
ENGINEERING AND DEVELOPMENT
The Company plans, engineers and oversees the development of its
communities. With the completion of its Sugarmill Woods Oak Village
subdivision in 1989, the Company has no remaining contractual development
obligations other than maintenance obligations until roads are accepted by
local governmental entities.
REGULATION AND ENVIRONMENTAL MATTERS
In the Company's projects, the nature and extent of improvements, zoning
and related matters are subject to the approval of and regulation by various
governmental bodies, including city, county, regional and other regulatory
agencies of the State of Florida and the Federal government. Sales
activities are regulated not only by the State of Florida and the Federal
government, but also by the states in which sales are made or solicited.
Prior to obtaining approval of plats for recording in a county (a
prerequisite to the sale of homesites), the Company must either complete
various improvements or post a bond with the appropriate
regulatory agency to ensure their completion.
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<PAGE> 8
REGULATION AND ENVIRONMENTAL MATTERS (Cont.)
Additionally, the Company has been required to post cash bonds and at
December 31, 1995 approximately $732,000 was held in escrow to collateralize
bonds executed by the Company in favor of various Florida counties, the
State of Florida and certain other states. The cash bonds are required in
connection with obtaining approvals to sell homesites and maintaining water
quality in certain waterways constructed by the Company.
In connection with the sale of Florida real estate, the State of Florida
Division of Land Sales, Condominiums and Mobile Homes, ("Division") requires
all sales contract documents, all sales literature and accompanying data to
be filed with it. Also, the real estate itself must be qualified for sale by
the Division. All of the Company's promotional material and all of its
subdivisions presently being offered for sale and requiring registration have
been so qualified.
In addition to Florida, certain states impose additional or different
requirements. These requirements include inspection of properties by
appropriate authorities, approval of sales literature, disclosures to
purchasers of specified information, assurances of future improvements,
approval of terms of sale and delivery to purchasers of a report describing
the property. The Company presently has homesites registered for sale in
Florida. The remainder of Sugarmill Woods is registered in Florida and 8
other states where registration is required. Regulation of land sales and
subdivision development has become increasingly stringent. In the past the
Company has limited or refrained from advertising and selling in certain
states where the expense and delay associated with regulatory compliance
outweigh the anticipated economic benefits.
The Company's homesite sales are also subject to Federal regulation. The
Federal Interstate Land Sales Full Disclosure Act (the "Land Sales Act")
requires developers to file with the Office of Interstate Land Sales
Registration a "Statement of Record", including a "Property Report"
disclosing material information regarding the property offered. The
Property Report must be delivered to each purchaser prior to the execution of
the sales contract and the purchaser has seven days within which to rescind
the contract. A purchaser may also rescind any purchase contract, or may sue
to recover damages, resulting from any sale in violation of the Land Sales
Act or the Federal Consumer Credit Protection Act (sometimes referred to as
the "Truth in Lending Act"), which requires disclosures to purchasers as to
finance charges and other matters in credit transactions.
The Company also is subject to various laws and governmental regulations
concerning environmentally related matters and is required to obtain various
permits in its development activities.
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<PAGE> 9
REGULATION AND ENVIRONMENTAL MATTERS (Cont.)
Despite the Company's success in the past in obtaining necessary permits
for its projects, it can be anticipated that increasingly stringent
requirements will be imposed upon the Company. Although the Company cannot
accurately predict the impact of these requirements, they might result in
time-consuming and costly compliance programs, discontinuance of certain
operations and substantial expenditures for pollution and water quality
control.
In addition, the continued effectiveness of permits already granted is
dependent upon many factors, some of which are outside the Company's control,
such as changes in policies, rules and regulations, and their interpretation
and application, within governmental agencies.
With the completion of the Sugarmill Woods Oak Village development work,
the Company has fulfilled its contractual development obligations to its
customers. The Company, however, still owns approximately 4,800 acres of
platted, undeveloped property for which it may have to apply for permits in
the future should its efforts to sell all or a portion of this property not
be successful. If such permits are sought and are denied, the Company might
not be able to develop the property as planned which could impact the
property's value. However, permitting problems which would materially
adversely affect the Company are not anticipated.
Many of the Federal and State regulatory authorities having jurisdiction
over the Company's activities have broad discretionary powers to enforce and
interpret the statutes and regulations which they administer, including
powers to: enjoin or suspend sales advertising and other sales practices;
require additional disclosures in sales literature and property reports;
require construction and installation of additional facilities; and revoke
licenses and permits relating to the Company's business activities. The
issuance of orders of suspension by one or more of such regulatory
authorities simultaneously affecting all or a major portion of the Company's
properties would materially adversely affect the Company's operations. In
addition, the orders of one regulatory authority may conflict with those of
another, thereby complicating compliance.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information regarding executive officers of the Company is contained
in Item 9 of Part III of this Annual Report on Form 10-KSB (General
Instruction G).
Item 2. Properties
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The Company's primary investments in properties relates to its Sugarmill
Woods project. The Company generally has fee simple title to these
properties, but substantially all of the Company's
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<PAGE> 10
Properties (cont.)
- ----------
properties are encumbered by mortgages under either its primary lender
agreement or other financing arrangements (see Item 6 and Note 10 to the
consolidated financial statements under Item 7).
Item 3. Legal Proceedings
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The Company is a party to a number of lawsuits incidental to the normal
operation of its business. Based upon information presently available, the
Company does not believe that the resolution of any of the suits
individually, or collectively, will have a material adverse effect on its
financial position (see Note 17 of Item 7).
Item 4. Submission of Matters to a Vote of Security Holders
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A shareholders meeting was not held during the year 1995.
PART II
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Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
- ------- ---------------------------------------------------------------------
The Company's Common Stock was traded on the American Stock Exchange, Inc.
("AMEX") (trading symbol--PGA) until January 4, 1991 at which time the
Company consented to the removal of its Common Stock and 6% Convertible
Subordinated Debentures from the AMEX. Subsequent to the AMEX de-listing the
Company attempted to establish relations with a brokerage firm who would
serve as a market maker for the Common Stock. Based on information received
from The National Quotation Bureau, Inc., there have been no reported
transactions in the Company's Common Stock since January 29, 1991. During
the period January 1, 1991 through January 29, 1991 the high and low bid
price for the Common Stock was $.03 and the high and low offer price was
$.10. No dividends have ever been paid on the Common Stock, and payment of
dividends is restricted under the terms of the two indentures pursuant to
which the Company's outstanding debentures are issued. As of December 31,
1995 there were 693 holders of record of the Company's Common Stock and 453
debenture holders.
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<PAGE> 11
Item 6. Management's Discussion and Analysis or Plan of Operation
- ------- ---------------------------------------------------------
PRELIMINARY NOTE
The description of the Company's business in the Annual Report on Form
10-KSB focuses on its traditional core business of selling individual homes and
homesites and the construction of residences. Readers should understand as
they read the report, however, that the Company is not presently pursuing its
core business until its debt obligations have been substantially eliminated.
The reason the Company is no longer pursuing its core business is set forth
with more particularity below.
During the fiscal year ended December 31, 1995, the Company's business
focus and emphasis changed substantially as it concentrated its sales and
marketing efforts almost exclusively on the disposition in bulk of its
undeveloped, platted, residential real estate. This change was prompted by
its continuing financial difficulties due to the principal and interest owed
on its debt and management's conclusion that a bulk sale was the best way to
reduce the Company's debt service obligations. If the Company is successful
in its sale of this undeveloped land, its remaining inventory will consist of
undeveloped commercial property. There can be no assurance that the Company
will be successful in its efforts to effect a bulk sale. Assuming a bulk
sale occurs, the Company intends to decide at that point whether it will
pursue the development and sale of the commercial property in accordance with
its traditional core business plans or whether it will attempt to sell such
property in bulk. That decision will depend, in part, on whether the Company
believes it can generate more revenue by developing and selling individual
commercial properties or by selling in bulk.
RESULTS OF OPERATIONS
Revenues for the year ended December 31, 1995 decreased by $4.5 million to
$961,000 compared to revenues of $5.5 million for the year ended December 31,
1994. A net loss of $2.4 million ($.93 per share) was incurred for 1995
compared to a net loss of $1.3 million ($.59 per share) for 1994. Included
in the 1995 and 1994 earnings per share computation is $640,000 ($.19 per
share of Common Stock) of annual cumulative preferred stock dividends in
arrears.
As of December 31, 1995 the Company was in default of its primary credit
agreements with First Union. The Company was unsuccessful in consummating a
large land sale to meet its obligations and does not have funds available to
make any payments of either principal or interest.
On October 12, 1995, the Company, the other "Borrowers" and the
"Guarantors" (as those terms are defined below) entered into a Forbearance
Agreement (the "Forbearance Agreement") with the Company's primary lender,
First Union National Bank of Florida, a national banking association (the
"Lender" or "First Union"), pursuant to which
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<PAGE> 12
RESULTS OF OPERATIONS (cont.)
Lender agreed to forbear initially through November 15, 1995, but ultimately
extended through March 28, 1996, subject to the terms and conditions of
the Forbearance Agreement, from exercising any of its rights and remedies
under its primary credit agreements with Borrowers (the "Loans"), which Loans
are currently in default. The "Borrowers" consist of the Company and its
subsidiaries, Sugarmill Woods, Inc., Burnt Store Marina, Inc. and Gulf Coast
Credit Corporation. The "Guarantors" consist of the following subsidiaries
of the Company: Southern Woods, Incorporated, Punta Gorda Isles Sales, Inc.,
Deep Creek Utilities, Inc., Burnt Store Utilities, Inc. and Sugarmill Woods
Sales, Inc.
On October 12, 1995, the Company also executed a Note and Loan Document
Purchase Agreement (the "Note Purchase Agreement") by and between Lender,
PGIP L.L.C., a Missouri limited liability company (the "Purchaser") and the
Borrowers. The Forbearance Agreement and the Note Purchase Agreement provide
that Lender will accept the Discounted Payoff Amount from the Purchaser (as
defined in the Forbearance Agreement and Note Purchase Agreement) in
immediately available funds as the purchase price of the documents evidencing
and securing the Loans (the "Loan Documents") in exchange for the assignment
to Purchaser of the Loan Documents without recourse, representation or
warranty (except for a warranty that Lender is the owner of said documents
and has not previously sold or assigned them).
As a condition to Lender's execution of the Forbearance Agreement,
Purchaser paid Lender multiple nonrefundable forbearance fees totalling
$168,000 on December 31, 1995 ($273,000 as of March 28, 1996), which
were applied to the purchase price of the Loan Documents. In addition,
upon execution of the Note Purchase Agreement, PGIP paid Lender a
nonrefundable initial loan purchase installment of $241,617.65 (the
"Initial Loan Purchase Payment"), which reduces the Discounted Payoff
Amount. The Initial Loan Purchase Payment paid to Lender was used by
Lender to pay the Company's 1993 property tax owed to Citrus and
Hernando Counties, Florida.
Purchaser has informed PGI that Purchaser's policy, though neither an
undertaking nor an obligation, will be not to proceed with collection of the
principal and interest evidenced and secured by the Loan Documents, so long
as the Borrowers pursue satisfactory efforts to market and sell the real
property that serves as the primary collateral for the Loans.
PGIP is managed by Love Savings Holding Company ("LSHC"), Andrew S. Love,
Jr. and Laurence A. Schiffer. Messrs. Love and Schiffer are directors and
executive officers of LSHC and own slightly more than half of all the issued
and outstanding voting stock of LSHC. Messrs. Love and Schiffer serve as
executive officers and directors of the Company and the other Borrowers and
the Guarantors.
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<PAGE> 13
RESULTS OF OPERATIONS (cont.)
On March 28, 1996 (the "Closing Date"), First Union assigned to PGIP all of
First Union's right, title and interest in and to the documents (the "Loan
Documents") evidencing and securing its primary credit agreements with the
Company and the Company's subsidiaries, Sugarmill Woods, Inc., Burnt Store
Marina, Inc. and Gulf Coast Credit Corporation (collectively, the
"Borrowers"), which credit agreements are in default and the maturity of the
indebtedness secured thereby has been accelerated.
PGIP purchased the Loan Documents for a total purchase price of
approximately $5,548,000 (the "Purchase Price"), including amounts paid by
PGIP to First Union prior to the Closing Date, or approximately 61.6% of the
approximately $9,007,000 owed First Union by the Company under the Loan
Documents. PGIP borrowed $3,249,521 of the Purchase Price from First Union
(the "Notes"). The Notes bear interest at the prime rate as published in the
Wall Street Journal plus 1% and mature on June 1, 1997. Interest on the
Notes is payable monthly. As security for payment of its obligations under
the Notes, PGIP assigned to First Union all of PGIP's right, title and
interest in and to the Loan Documents.
The assignment of the Loan Documents to PGIP was pursuant to the terms and
conditions of that certain Note and Loan Documents Purchase Agreement dated
as of October 12, 1995, by and between First Union, PGIP and the Borrowers,
as amended by letter agreements dated November 10, 1995, December 15, 1995,
January 17, 1996 and February 16, 1996 and as further amended by that certain
Modification of Note and Loan Documents Purchase Agreement dated as of the
Closing Date.
In April 1994 the Company entered into a series of agreements wherein the
Company sold the remainder of its Southern Woods developed homesites
inventory (approximately 72 homesites), the remainder of the undeveloped
acreage of Southern Woods (approximately 200 acres) and 162 prepaid water and
sewer connections in exchange for a $2.4 million reduction in the principal
due to its primary lender, a net $310,000 reduction in accrued interest due
to the primary lender, the satisfaction of $362,000 in other liabilities and
additional closing costs of $71,000 (the "Second Secured Lender
Transaction"). Included in other income for 1994 is $1.5 million gain
related to the sale of the Southern Woods development which represents the
excess fair market value over carrying value.
The resulting principal and interest payable to its primary lender, due to
the sale of Southern Woods, retains a maturity date of July 8, 1997.
Effective with the closing, the Company's interest rate has been reduced from
the default rate of prime plus 5% to prime plus 1.5%.
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<PAGE> 14
Real Estate Activities
- ----------------------
Sales revenues by major components for real estate operations (excluding
improvement revenues related to prior sales) for the years 1995 and 1994
were:
<TABLE>
<CAPTION>
1995 1994
---- ----
($ in thousands)
<S> <C> <C>
Home sales $ - $ 2,340
Homesite sales-gross 44 240
Acreage sales 80 528
------- -------
$ 124 $ 3,108
======= =======
</TABLE>
Cost by major component for real estate operations (excluding improve
costs related to prior sales) for the years 1995 and 1994 were:
<TABLE>
<CAPTION>
1995 1994
---- ----
($ in thousands)
<S> <C> <C>
Home sales $ - $ 2,324
Homesite sales-gross 56 291
Acreage sales 6 155
------- -------
$ 62 $ 2,770
======= =======
</TABLE>
Gross profit margins by major components for real estate operations for
the years 1995 and 1994 were:
<TABLE>
<CAPTION>
1995 % 1994 %
---- - ---- -
($ in thousands)
<S> <C> <C> <C> <C>
Home sales $ - - % $ 16 .68 %
Homesite sales-gross (12) (27.3)% (51) (21.1) %
Acreage sales 74 92.5 % 373 70.6 %
---- ------ ----- --------
$62 50.0 % $338 10.9 %
</TABLE>
Home Sales
- ----------
Home sales are recorded at closing. Consequently, there is a several month
time lag between contract date and revenue recognition.
Data related to home contracts and closings for the periods indicated were:
<TABLE>
<CAPTION>
1995 1994
---- ----
($ in thousands)
<S> <C> <C>
Number of units closed $ - $ 22
Average closed unit price - 106
Number of home sales contracts - 14
Year-end construction backlog $ - $ -
</TABLE>
- 14 -
<PAGE> 15
Home Sales (cont.)
The Company believes the current economic conditions and increased
competition will continue to negatively impact housing sales and that the
Company will not experience a substantial improvement in either home sales
volume or gross profit margins. In response to this outlook, the Board of
Directors approved to temporarily suspend the new home construction operation
in Sugarmill Woods.
Effective July 1, 1994, the Company assigned its interest in the remaining
home contracts to another builder in the Sugarmill Woods area, retaining only
the rental and resale homesite division as an operating entity. Since the
home building division required a substantial amount of accounting and
administrative support which was not treated as direct overhead, the Company
was able to reduce its work force by 9 people.
Homesite Sales
- --------------
With the closing of the April 1994 Secured Lender Transaction, the
Company's homesite sales efforts came to an end during the middle part of
1994. After the sale of the Southern Woods development the Company was left
with only a few undeveloped homesites.
Also, effective January 1, 1990, the Company implemented the installment
method of homesite sales reporting in accordance with Statement of Financial
Accounting Standard No. 66 "Accounting for Sales of Real Estate" (see Item
1 and Note 3 to the consolidated financial statements under Item 7.). This
method is being utilized for all installment sales regardless of the
down-payment percentage. With the Secured Lender Transaction non-recourse
sale of receivables, all previously deferred profits were recognized during
1992.
Acreage Sales
- -------------
Other than the Second Secured Lender Transaction during 1994, no
significant bulk sales were generated in 1995 and 1994. The acreage sales
reported for 1994 include miscellaneous lots and out-parcels located in
Charlotte County.
The Company intends to continue its efforts to sell a portion or all of its
remaining 4,800 acres of undeveloped platted property and 740 acres of
undeveloped commercial property.
Other Activities
- ----------------
The Company's cash accounts are substantially smaller given the decrease
in operations. Interest income in 1995 decreased by $104,000 compared to a
1994 decrease of $119,000 from 1993.
- 15 -
<PAGE> 16
Other Activities (Cont.)
- ----------------
Included in 1994 other income is a $1.5 million gain related to the Second
Secured Lender Transaction. Other income increased in 1994 as the result of
the April 1994 Secured Lender Transaction. The decrease in other income in
1995 is due to the continued downsizing of the Company's operating
activities.
Costs and Expenses
- ------------------
The relationship of selling expenses and real estate sales was as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
($ in thousands)
<S> <C> <C>
Selling expenses $ 39 $ 178
Selling expenses as a
percentage of gross
sales revenues for real
estate operations 31.5% 5.7%
</TABLE>
Selling expenses decreased by $139,000 (78.1%) during 1995 compared to 1994
and in 1994 they decreased by $178,000 (50.0%) compared to 1993. The
decrease in 1995 is a result of the reduction in selling activity after the
Secured Lender Transactions closed.
The relationship of general and administrative expenses and real estate
sales was as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
($ in thousands)
<S> <C> <C>
General and administrative
expenses $ 541 $ 1,065
General and administrative
expenses as a percentage
of gross sales revenues for
real estate operations 436.3% 34.3%
</TABLE>
In an effort to conserve cash and reduce overhead, the Company consolidated
its administrative office functions in St. Louis, Missouri. The Company has
contracted out the services to Love Real Estate Company ("LREC"), an
affiliate of Love-PGI Partners, the Company's Preferred Shareholder (see note
18), to handle the day-to-day accounting for a fee. As a result general and
administrative expenses decreased by $524,000 (49.2%) in 1995 compared to
1994. The decrease reflects lower costs associated with fewer personnel
required to operate the downsized Company. General and administrative
expenses will continue to decline in 1996.
Interest expense for the two years ended December 31, 1995 was:
<TABLE>
<CAPTION>
1995 1994
---- ----
($ in thousands)
<S> <C> <C>
Interest expense $ 2,380 $2,119
</TABLE>
- 16 -
<PAGE> 17
Costs and Expenses (Cont.)
- ------------------
Interest expense in 1995 increased by $261,000 (12.3%) compared to 1994 and
decreased by $150,000 (6.6%) in 1994 compared to 1993 due to the Secured
Lender Transaction.
Other expenses decreased by $160,000 (29.6%) in 1995 compared to 1994 and
increased by $77,000 (16.6%) in 1994 compared to 1993 due to real estate
valuation adjustments as discussed in note 16.
During 1994 the Company made adjustments of $99,000 to reduce the carrying
value of various parcels of land located in Charlotte and Citrus County,
Florida. The Company recognized the loss in value of the property because of
a down zoning required by the State of Florida Division of Community Affairs
and a sluggish real estate market.
FINANCIAL CONDITION
Assets totaled $11.7 million at December 31, 1995 compared to $12.6 million
at December 31, 1994 reflecting the following changes:
<TABLE>
<CAPTION>
Increase
1995 1994 (Decrease)
---- ---- ----------
($ in thousands)
<S> <C> <C> <C>
Cash $ 1,165 $ 1,261 $ (96)
Receivables 693 1,246 (553)
Land and improvement
inventories 9,031 9,154 (123)
Net property and equipment 81 119 (38)
Other assets 766 788 (22)
------- ------- -------
$11,736 $12,568 $ (832)
======= ======= =======
</TABLE>
The $693,000 in receivables on real estate sales at December 31, 1995
related to a 1988 receivable sale with recourse to Finova Financial Services
("Finova", f.k.a. Greyhound Real Estate Finance) treated as a financing
transaction for accounting purposes. As a result of the Secured Lender
Transaction, the Company does not have receivables available for replacement
and is therefore unable to meet its recourse obligations. However, the
Company has requested that Finova permit the Company to satisfy its
replacement obligation by cancelling or foreclosing the delinquent accounts
and reselling the property for the lender. Finova has not yet responded to
this request, and the Company has no assurance that it will receive a
favorable response. The $553,000 decrease in receivables reflects the
continuing paydown of the Finova portfolio.
A comparison of the contracts receivable delinquency status at December 31,
1995 and 1994 follows:
- 17 -
<PAGE> 18
FINANCIAL CONDITION (Cont.)
<TABLE>
<CAPTION>
December 31, December 31,
1995 % 1994 %
---- - ---- -
($ in thousands)
<S> <C> <C> <C> <C>
Current $ 741 46.3% $ 1,316 60.2%
------- ----- ------- -----
31 days to 60 days delinquent 91 5.7 97 4.4
61 days to 90 days delinquent 38 2.4 58 2.7
Over 90 days 729 45.6 716 32.7
------- ----- ------- -----
Total delinquency 858 53.7 871 39.8
------- ----- ------- -----
Total contracts $ 1,599 100.0% $ 2,187 100.0%
======= ====== ======= ======
</TABLE>
The Company has experienced a deterioration in the quality of the contracts
receivable portfolio over the past several years. The Company believes the
deterioration is the result of the decline in the economy, the adverse
publicity regarding community developers as a result of the GDC bankruptcy,
as well as the difficulty of implementing foreign contract collection
activities.
Other assets at December 31, 1995 decreased by $22,000 compared to year end
1994 primarily as a result of the normal amortization of prepaid financing
costs and lower prepaid expenses related to receivable exchanges.
Liabilities were $31.4 million at December 31, 1995 compared to $29.7
million at December 31, 1994, reflecting the following changes:
<TABLE>
<CAPTION>
Increase
1995 1994 (Decrease)
---- ---- ----------
($ in thousands)
<S> <C> <C> <C>
Accounts payable $ 91 $ 79 $ 12
Other liabilities 1,143 1,512 (369)
Accrued interest 8,471 6,341 2,130
Credit agreements - primary lender 7,287 7,002 285
Notes and mortgages payable 3,802 4,250 (448)
Convertible subordinated debentures payable 9,059 9,059 -
Convertible debentures payable 1,500 1,500 -
-------- -------- -------
$ 31,353 $ 29,743 $ 1,610
======== ======== =======
</TABLE>
The $2.1 million increase in accrued interest at December 31, 1995 compared
to year end 1994 reflects changes in the following:
<TABLE>
<CAPTION>
Increase
1995 1994 (Decrease)
---- ---- ----------
($ in thousands)
<S> <C> <C> <C>
Primary lender $ 1,541 $ 791 $ 750
Debentures 5,628 4,388 1,240
Other 1,302 1,162 140
------- ------- -------
$ 8,471 $ 6,341 $ 2,130
======= ======= =======
</TABLE>
- 18 -
<PAGE> 19
FINANCIAL CONDITION (Cont.)
The increase is primarily due to the nonpayment of interest on the
company's debentures (see Note 11 to the consolidated financial statements
under Item 7).
The $448,000 reduction in notes and mortgages payable primarily represents
normal principal reductions required to amortize the Finova mortgage. As a
result of decreased operations the Company was able to attain further
reductions in notes payable by paying off equipment leases at substantial
discounts.
The Company's capital deficiency increased to $19.6 million at December
31, 1995 from a $17.1 million capital deficiency at December 31, 1994,
reflecting the 1995 operating loss.
To fund operations during the two years ended December 31, 1995, the
Company relied upon a combination of borrowings, sales of land and
improvement inventories and contracts receivables.
As of December 31, 1995 the Company was in default of its primary credit
agreements with First Union. The Company was unsuccessful in consummating a
large land sale to meet its obligations and does not have funds available to
make any payments of either principal or interest.
On October 12, 1995, the Company, the other "Borrowers" and the
"Guarantors" (as those terms are defined below) entered into a Forbearance
Agreement (the "Forbearance Agreement") with the Company's primary lender,
First Union National Bank of Florida, a national banking association (the
"Lender" or "First Union"), pursuant to which Lender agreed to forbear
initially through November 15, 1995, but ultimately extended through March 28,
1996, subject to the terms and conditions of the Forbearance Agreement, from
exercising any of its rights and remedies under its primary credit agreements
with Borrowers (the "Loans"), which Loans are currently in default. The
"Borrowers" consist of the Company and its subsidiaries, Sugarmill Woods,
Inc., Burnt Store Marina, Inc. and Gulf Coast Credit Corporation. The
"Guarantors" consist of the following subsidiaries of the Company: Southern
Woods, Incorporated, Punta Gorda Isles Sales, Inc., Deep Creek Utilities,
Inc., Burnt Store Utilities, Inc. and Sugarmill Woods Sales, Inc.
On October 12, 1995, the Company also executed a Note and Loan Document
Purchase Agreement (the "Note Purchase Agreement") by and between Lender,
PGIP L.L.C., a Missouri limited liability company (the "Purchaser") and the
Borrowers. The Forbearance Agreement and the Note Purchase Agreement provide
that Lender will accept the Discounted Payoff Amount (as defined in the
Forbearance Agreement and Note Purchase Agreement) in immediately available
funds as the purchase price of the documents evidencing and securing the
Loans (the "Loan Documents") in exchange for the assignment to Purchaser of
the Loan Documents without recourse, representation or warranty (except for a
- 19 -
<PAGE> 20
FINANCIAL CONDITION (Cont.)
warranty that Lender is the owner of said documents and has not previously
sold or assigned them).
As a condition to Lender's execution of the Forbearance Agreement,
Purchaser paid Lender multiple nonrefundable forbearance fees totalling
$168,000 on December 31, 1995 ($273,000 as of March 28, 1996), which
were applied to the purchase price of the Loan Documents. In addition,
upon execution of the Note Purchase Agreement, PGIP paid Lender a
nonrefundable initial loan purchase installment of $241,617.65 (the
"Initial Loan Purchase Payment"), which reduces the Discounted Payoff
Amount. The Initial Loan Purchase Payment paid to Lender was used by
Lender to pay the Company's 1993 property tax owed to Citrus and
Hernando Counties, Florida.
Purchaser has informed PGI that Purchaser's policy, though neither an
undertaking nor an obligation, will be not to proceed with collection of the
principal and interest evidenced and secured by the Loan Documents, so long
as the Borrowers pursue satisfactory efforts to market and sell the real
property that serves as the primary collateral for the Loans.
PGIP is managed by Love Savings Holding Company ("LSHC"), Andrew S. Love,
Jr. and Laurence A. Schiffer. Messrs. Love and Schiffer are directors and
executive officers of LSHC and own slightly more than half of all the issued
and outstanding voting stock of LSHC. Messrs. Love and Schiffer serve as
executive officers and directors of the Company and the other Borrowers and
the Guarantors.
On March 28, 1996 (the "Closing Date"), the Company's primary lender, First
Union National Bank of Florida, a national banking association ("First
Union") assigned to PGIP L.L.C., a Missouri limited liability company
("PGIP") all of First Union's right, title and interest in and to the
documents (the "Loan Documents") evidencing and securing its primary credit
agreements with the Company and the Company's subsidiaries, Sugarmill Woods,
Inc., Burnt Store Marina, Inc. and Gulf Coast Credit Corporation
(collectively, the "Borrowers"), which credit agreements are in default and
the maturity of the indebtedness secured thereby has been accelerated.
PGIP purchased the Loan Documents for a total purchase price of
approximately $5,548,000 (the "Purchase Price"), including amounts paid by
PGIP to First Union prior to the Closing Date, or approximately 61.6% of the
approximately $9,007,000 owed First Union by the Company under the Loan
Documents. PGIP borrowed $3,249,521 of the Purchase Price from First Union
(the "Notes"). The Notes bear interest at the prime rate as published in the
Wall Street Journal plus 1% and mature on June 1, 1997. Interest on the
Notes is payable monthly. As security for payment of its obligations under
the Notes, PGIP assigned to First Union all of PGIP's right, title and
interest in and to the Loan Documents.
- 20 -
<PAGE> 21
FINANCIAL CONDITION (Cont.)
The assignment of the Loan Documents to PGIP was pursuant to the terms and
conditions of that certain Note and Loan Documents Purchase Agreement dated
as of October 12, 1995, by and between First Union, PGIP and the Borrowers,
as amended by letter agreements dated November 10, 1995, December 15, 1995,
January 17, 1996 and February 16, 1996 and as further amended by that certain
Modification of Note and Loan Documents Purchase Agreement dated as of the
Closing Date.
In 1994 the Company successfully completed the Second Secured Lender
Transaction. The transaction was comprised of a series of agreements
executed in April 1994 wherein the Company sold the remainder of its Southern
Woods developed homesites inventory (approximately 72 homesites), the
remainder of the undeveloped acreage of Southern Woods (approximately 200
acres) and 162 prepaid water and sewer connections in exchange for a $2.4
million reduction in the principal due to its primary lender, a net $310,000
reduction in accrued interest due to the primary lender, the satisfaction of
$362,000 in other liabilities and additional closing costs of $71,000.
Included in the 1994 earnings is a $1.5 million gain related to the sale of
the Southern Woods development. The 1994 Secured lender Transaction has been
treated as a non-cash transaction in the Company's Statement of Cash Flows.
In 1992 the Company sold approximately 1,300 fully developed homesites, 90
acres, its Sugarmill Woods sales office and $4.7 million in receivables on
real estate to subsidiaries of the Company's primary lender, BancFlorida.
The sale was made without recourse for delinquent receivables. In addition,
the Company conveyed 350 acres to Love-PGI Partners, L.P., holders of a
portion of the Company's collateralized convertible debentures for a $1.2
million principal and interest reduction in the amount due to convertible
debenture holders as well as a $1.0 million decrease in accrued management
fees. The 1992 Secured Lender Transaction has been treated as a non-cash
transaction in the Company's Statement of Cash Flows.
During the two year period ended December 31, 1995, the Company's financial
condition remained weak and it experienced liquidity shortages, which were at
times severe.
Declining levels of business activities are reflected in declining cash
balances, which at year end 1995 and 1994 were $1.2 and $1.3 million,
respectively.
Cash decreased by $96,000 to $1.2 million at December 31, 1995 compared to
$1.3 million at December 31, 1994. Net cash flow provided by operations
decreased by $333,000 to $66,000 for the year ended December 31, 1995 from
cash provided by operations of $399,000 for the 1994 year.
Cash received from operations during 1995 was $1.5 million, a $1.9 million
decrease from cash received during 1994. The majority of the decrease is
attributable to reduced principal and interest collections from real estate
sales and receivables.
- 21 -
<PAGE> 22
FINANCIAL CONDITION (Cont.)
Cash expended for operations decreased by $1.6 million to $1.4 million
during 1995 from $3.0 million in 1994, reflecting decreases in the following
classifications; payments for real estate operations ($1.7 million), land
improvements ($5,000), interest expense ($69,000) and other of ($42,000).
The increase in general and administrative ($121,000) is due to payment of
delinquent real estate taxes.
Cash expended for operations decreased by $2.8 million to $3.0 million
during 1994 from $5.8 million in 1993, reflecting decreases in the following
classifications; payments for real estate operations ($2.3 million), land
improvements ($55,000), general and administrative ($213,000), interest
expense ($91,000), and other of ($83,000).
The $508,000 and $704,000 utilized during 1995 and 1994 by financing
activities represents payments to Finova from collections on the receivables
on real estate sold to Finova in 1988.
In connection with the 1994 Second Secured Lender Transaction, the Company
received the following:
- $2.4 million reduction in the principal due its primary lender a five
year extension of the maturity date on the $7.0 million remaining
First Union debt.
- $310,000 net reduction in accrued interest due to the primary lender.
- Satisfaction of $362,000 in other liabilities and additional closing
costs of $71,000.
- The Company's interest rate has been reduced from the default rate of
prime plus 5% to prime plus 1.5%.
As of the date of this filing, the Company is in default of the entire
principal plus interest on its convertible subordinated debentures payable in
amounts indicated in the following table:
<TABLE>
<CAPTION> 12/31/95
Principal Unpaid
Amount Due Interest
---------- --------
($ in thousands)
<S> <C> <C>
Convertible subordinated debentures due June 1, 1991 $ 1,034 $ 396
Convertible subordinated debentures due May 1, 1992 8,025 3,155
------- -------
$ 9,059 $ 3,551
======= =======
</TABLE>
The Company does not have funds available to make any payments of either
principal or interest on the above debentures. If a debenture holder or
Trustee institutes action to collect on the debentures, such action could
prohibit the Company from continuing to operate in the normal course of
business (see Notes 10 and 11 to the consolidated financial statements under
Item 7).
- 22 -
<PAGE> 23
FINANCIAL CONDITION (Cont.)
The Company has investigated the consequences of a bankruptcy filing and
believes that such an event is not in the best interest of either the
debenture or equity holders because a bankruptcy filing would negatively
impact the Company's business, as well as cause an acceleration of the First
Union (formerly known as BancFlorida), the Company's Primary Lender, Finova
and secured debenture debt. Management believes that a bankruptcy filing
would prompt all secured lenders to initiate foreclosure proceedings. Since
Company assets are encumbered by mortgages, the secured lenders have a
perfected security interest and priority over the unsecured debenture
holders.
- 23 -
<PAGE> 24
Item 7. Financial Statements and Supplementary Data
- ------- -------------------------------------------
REPORT OF INDEPENDENT ACCOUNTANTS
Independent Auditors' Report
The Stockholders and Board of Directors
PGI Incorporated
St. Louis, Missouri
We have audited the accompanying consolidated statements of financial
position of PGI Incorporated and subsidiaries as of December 31, 1995 and
1994, and the related consolidated statements of operations, stockholders'
deficiency and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PGI
Incorporated and subsidiaries at December 31, 1995 and 1994, and the results
of their operations and cash flows for the years then ended in conformity
with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming the Company
will continue as a going concern. As discussed in Note 11 to the financial
statements, the Company is currently in default of certain sinking fund and
interest payments on its convertible subordinated debentures. As discussed
in Note 2, the Company is also currently in default of interest payments on
its primary debt, as well as the 1994 property taxes owed on
properties serving as collateral for this obligation. In addition, the
Company has an accumulated deficit. These matters raise substantial doubt
about the Company's ability to continue as a going concern. Management's
plans in this regard are described in Notes 10 and 11. The financial
statements do not include any adjustments that might result from the outcome
of this uncertainty.
BDO Seidman, LLP
St. Louis, Missouri
April 5, 1996
- 24 -
<PAGE> 25
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
DECEMBER 31, 1995 AND 1994
--------------
<CAPTION>
ASSETS LIABILITIES
====== ===========
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <S> <C> <C>
Cash, including restricted cash of Accounts payable $ 91,000 $ 79,000
$1,102,000 and $1,235,000
(Note 4) $ 1,165,000 $1,261,000
Receivables on real estate sales - net Other liabilities (Note 9) 1,143,000 1,512,000
(Note 5) 682,000 1,227,000
Other receivables 11,000 19,000 Accrued interest:
Land and improvement inventories Primary lender (Note 2) 1,541,000 791,000
(Note 6) 9,031,000 9,154,000
Property and equipment - net (Note 7) 81,000 119,000 Debentures 5,628,000 4,388,000
Other assets (Note 8) 766,000 788,000 Other 1,302,000 1,162,000
Credit agreements - (Note 10)
Primary lender (Note 2) 7,287,000 7,002,000
Notes and mortgages payable 3,802,000 4,250,000
Convertible subordinated
debentures payable (Note 11) 9,059,000 9,059,000
Convertible debentures payable
(Note 12) 1,500,000 1,500,000
------------ ------------
31,353,000 29,743,000
------------ ------------
Commitments and
contingencies (Note 17)
STOCKHOLDERS' DEFICIENCY
Preferred stock, par value
$1.00 per share; authorized
5,000,000 shares; 2,000,000
Class A cumulative convertible
shares issued and outstanding;
(liquidation preference of
$4.00 per share or $8,000,000)
(Note 14) 2,000,000 2,000,000
Common stock, par value $.10
per share; authorized
25,000,000 shares; 3,317,555
shares issued and outstanding
(Note 14) 332,000 332,000
Paid-in capital 13,698,000 13,698,000
Accumulated deficit (35,647,000) (33,205,000)
------------ ------------
(19,617,000) (17,175,000)
------------ ------------ ------------ ------------
$ 11,736,000 $ 12,568,000 $ 11,736,000 $ 12,568,000
============ ============ ============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
- 25 -
<PAGE> 26
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995 AND 1994
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Revenues:
Real estate sales (Note 3) $ 124,000 $ 3,108,000
Interest income (Note 3) 167,000 271,000
Other income 670,000 2,086,000
------------ ------------
961,000 5,465,000
------------ ------------
Costs and expenses:
Cost of real estate sales (Note 3) 62,000 2,770,000
Selling expenses 39,000 178,000
General and administrative expenses (Note 18) 541,000 1,065,000
Interest 2,380,000 2,119,000
Other expenses 381,000 541,000
Provision for land and property cost reduction to
net realizable value - 99,000
------------ ------------
3,403,000 6,772,000
------------ ------------
Net loss ($ 2,442,000) ($ 1,307,000)
============= =============
Loss per share of common stock and common stock
equivalents after considering preferred dividends
of $640,000 for 1995 and 1994:
Primary net loss per share ($ .93) ($ .59)
======= =======
See accompanying notes to consolidated financial statements.
</TABLE>
- 26 -
<PAGE> 27
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995 AND 1994
-------------------
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Cash received from operations:
Collections from real estate sales and receivables on such sales $ 852,000 $ 2,670,000
Interest on homesite and acreage contracts 130,000 203,000
Collections from amenity and other operations 277,000 283,000
Other interest received 42,000 39,000
Other receipts 190,000 246,000
----------- -----------
1,491,000 3,441,000
----------- -----------
Cash expended for operations:
Payments to subcontractors and vendors for real estate
operations and sale and marketing activities 110,000 1,791,000
Land purchases and improvements - 5,000
Payments for amenity and other operations 327,000 268,000
General and administrative costs 672,000 551,000
Interest paid 250,000 319,000
Other disbursements 66,000 108,000
----------- -----------
1,425,000 3,042,000
----------- -----------
Net cash flow provided by (used in) operating activities 66,000 399,000
----------- -----------
Cash flows from investing activities:
Proceeds from fixed asset sales 1,000 11,000
Purchases of property and equipment - (1,000)
----------- -----------
Net cash flow used in investing activities 1,000 10,000
----------- -----------
Cash flows from financing activities:
Proceeds from borrowings 345,000 35,000
Principal payments on debt (508,000) (704,000)
----------- -----------
Net cash flow used in financing activities (163,000) (669,000)
----------- -----------
Net decrease in cash (96,000) (260,000)
Cash at beginning of year 1,261,000 1,521,000
----------- -----------
Cash at end of year $ 1,165,000 $ 1,261,000
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
- 27 -
<PAGE> 28
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
YEARS ENDED DECEMBER 31, 1995 AND 1994
-------------------
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Reconciliation of net loss to net cash provided by
(used in) operating activities:
Net loss $ (2,442,000) $ (1,307,000)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation 36,000 51,000
Net allowance and valuations related to real estate sales (86,000) (68,000)
Provision for land and property cost reduction to net
realizable value - 99,000
Gain on disposition of assets - (1,463,000)
Loss on sale of property, plant & equipment 1,000 17,000
(Increase) decrease in:
Contracts and mortgages receivable 561,000 712,000
Other receivables 29,000 100,000
Land and improvement inventories - net 123,000 601,000
Loan costs and other prepaid expenses 22,000 43,000
Increase (decrease) in:
Accounts payable 12,000 (250,000)
Accrued interest 2,130,000 1,801,000
Other accrued expenses (248,000) 301,000
Deposits and advances (72,000) (238,000)
------------ ------------
2,508,000 1,706,000
------------ ------------
Net cash flow provided by (used in) operating activities $ 66,000 $ 399,000
============ ============
Supplemental schedule of non-cash investing and financing activities:
In 1994 former employee compensation and professional service fees were
paid through the exchange of assets. See Note 18.
In 1994 the Company reduced secured lender debt through the exchange of
assets. See Note 2.
See accompanying notes to consolidated financial statements.
</TABLE>
- 28 -
<PAGE> 29
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
YEARS ENDED DECEMBER 31, 1995 AND 1994
-------------------
<CAPTION>
Preferred Stock Common Stock Retained
---------------- ------------ Paid-In Earnings
Shares Par Value Shares Par value Capital (Deficit)
------ --------- ------ --------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balances at
January 1, 1994 2,000,000 $ 2,000,000 3,317,555 $ 332,000 $ 13,698,000 ($31,898,000)
Net loss - - - - - (1,307,000)
--------- ----------- --------- --------- ------------ ------------
Balances at
December 31, 1994 2,000,000 $ 2,000,000 3,317,555 $ 332,000 $ 13,698,000 ($33,205,000)
Net loss - - - - - (2,442,000)
--------- ----------- --------- --------- ------------ ------------
Balances at
December 31, 1994 2,000,000 $ 2,000,000 3,317,555 $ 332,000 $ 13,698,000 $35,647,000
========= =========== ========= ========= ============ ===========
See accompanying notes to consolidated financial statements.
</TABLE>
- 29 -
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Significant Accounting Policies:
--------------------------------
Principles of Consolidation
- ---------------------------
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries after eliminating all significant
intercompany transactions.
Accounting Estimates
- --------------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Impairment of Long-Lived Assets
- -------------------------------
In March 1995, the FASB issued its Statement of Financial Accounting
Standards No. 121, Accounting for the Impairment of Long-Lived Assets and For
Long-Lived Assets to Be Disposed Of ("SFAS 121"). SFAS 121 requires that
long-lived assets and certain intangibles to be held and used by an entity be
reviewed for impairment when events or changes in circumstances indicate that
the carrying amount may not be recoverable. In addition, SFAS 121 requires
long-lived assets and certain intangibles to be disposed of to be reported at
the lower of carrying amount or fair value less costs to sell. SFAS 121 is
effective for fiscal years beginning after December 15, 1995. Management
does not expect the application of this pronouncement to have a material
effect on the financial statements of the Company.
Revenue and Profit Recognition
- ------------------------------
Homesites
---------
Prior to July 1992, homesites were generally sold under contracts for deed
or deed, note and mortgage which provide for a down payment and monthly
installments, including interest, for periods up to ten years. Prior to 1990
income from sales of homesites was recorded when minimum down payment
(including interest) and other requirements were met. However, because of
collectability problems with certain off-site broker/foreign sales programs,
effective January 1, 1990, the Company adopted the installment method of
profit recognition in accordance with Statement of Financial Accounting
Standards No. 66 "Accounting for Sales of Real Estate".
Homes Units
-----------
Home sales are recorded at closing.
- 30 -
<PAGE> 31
Acreage
-------
Sales of undeveloped and developed acreage tracts are recognized, net of
any deferred revenue and valuation discount, when minimum down payment and
other requirements are met.
Provision for Cancellations
- ---------------------------
For sales prior to January 1, 1990, the Company provided for estimated
future cancellations of receivables on real estate sales by charges to
operations based on historical collection experience and analysis of
delinquencies. Balances related to cancelled receivables are charged to the
allowance for cancellations.
Land and Improvement Inventories
- --------------------------------
Land held for sale to customers is stated at cost, which is not in excess
of estimated net realizable value. Homesite costs are allocated to projects
based on area methods, which consider square footage, future improvement
costs and frontage.
Property and Equipment
- ----------------------
Property and equipment are stated at cost. Depreciation is provided
principally by the straight-line method over the estimated useful lives of
the related assets. Gains or losses resulting from the disposition of
property and equipment are respectively included in other income or other
expense.
Per Share Data
- --------------
Loss per share is computed by dividing net loss, after including dividends
on the Company's preferred stock, by the average number of common shares
outstanding. For this purpose, the Company's cumulative convertible
preferred stock and convertible debentures are not deemed to be common stock
equivalents but outstanding vested stock options are considered as such.
However, stock options are not considered in the calculation as they are
antidilutive. The average number of common shares outstanding was 3,317,555
for 1995 and 1994.
Cash and Cash Equivalents
- -------------------------
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less to be cash equivalents.
2. Secured Lender Transactions:
----------------------------
As of December 31, 1995 the Company was in default of its primary credit
agreements with First Union. The Company was unsuccessful in consummating a
large land sale to meet its obligations and does not have funds available to
make any payments of either principal or interest.
On October 12, 1995, the Company, the other "Borrowers" and the
"Guarantors" (as those terms are defined below) entered into a
- 31 -
<PAGE> 32
Secured Lender Transactions (Cont.)
- ---------------------------
Forbearance Agreement (the "Forbearance Agreement") with the Company's
primary lender, First Union National Bank of Florida, a national banking
association (the "Lender" or "First Union"), pursuant to which Lender agreed
to forbear initially through November 15, 1995, but ultimately extended through
March 28, 1996, subject to the terms and conditions of the Forbearance
Agreement, from exercising any of its rights and remedies under its primary
credit agreements with Borrowers (the "Loans"), which Loans are currently in
default. The "Borrowers" consist of the Company and its subsidiaries,
Sugarmill Woods, Inc., Burnt Store Marina, Inc. and Gulf Coast Credit
Corporation. The "Guarantors" consist of the following subsidiaries of the
Company: Southern Woods, Incorporated, Punta Gorda Isles Sales, Inc., Deep
Creek Utilities, Inc., Burnt Store Utilities, Inc. and Sugarmill Woods Sales,
Inc.
On October 12, 1995, the Company also executed a Note and Loan Document
Purchase Agreement (the "Note Purchase Agreement") by and between Lender,
PGIP L.L.C., a Missouri limited liability company (the "Purchaser") and the
Borrowers. The Forbearance Agreement and the Note Purchase Agreement provide
that Lender will accept the Discounted Payoff Amount (as defined in the
Forbearance Agreement and Note Purchase Agreement) in immediately available
funds as the purchase price of the documents evidencing and securing the
Loans (the "Loan Documents") in exchange for the assignment to Purchaser of
the Loan Documents without recourse, representation or warranty (except for a
warranty that Lender is the owner of said documents and has not previously
sold or assigned them).
As a condition to Lender's execution of the Forbearance Agreement,
Purchaser paid Lender multiple nonrefundable forbearance fees totalling
$168,000 on December 31, 1995 ($273,000 as of March 28, 1996), which
were applied to the purchase price of the Loan Documents. In addition,
upon execution of the Note Purchase Agreement, PGIP paid Lender a
nonrefundable initial loan purchase installment of $241,617.65 (the
"Initial Loan Purchase Payment"), which reduces the Discounted Payoff
Amount. The Initial Loan Purchase Payment paid to Lender was used by
Lender to pay the Company's 1993 property tax owed to Citrus and
Hernando Counties, Florida.
Purchaser has informed PGI that Purchaser's policy, though neither an
undertaking nor an obligation, will be not to proceed with collection of the
principal and interest evidenced and secured by the Loan Documents, so long
as the Borrowers pursue satisfactory efforts to market and sell the real
property that serves as the primary collateral for the Loans.
PGIP is managed by Love Savings Holding Company ("LSHC"), Andrew S. Love,
Jr. and Laurence A. Schiffer. Messrs. Love and Schiffer are directors and
executive officers of LSHC and own slightly more than half of all the issued
and outstanding voting stock of LSHC. Messrs. Love and Schiffer serve as
executive officers and directors of the Company and the other Borrowers and
the Guarantors.
- 32 -
<PAGE> 33
Secured Lender Transactions (Cont.)
- ---------------------------
On March 28, 1996 (the "Closing Date"), the Company's primary lender, First
Union National Bank of Florida, a national banking association ("First
Union") assigned to PGIP L.L.C., a Missouri limited liability company
("PGIP") all of First Union's right, title and interest in and to the
documents (the "Loan Documents") evidencing and securing its primary credit
agreements with the Company and the Company's subsidiaries, Sugarmill Woods,
Inc., Burnt Store Marina, Inc. and Gulf Coast Credit Corporation
(collectively, the "Borrowers"), which credit agreements are in default and
the maturity of the indebtedness secured thereby has been accelerated.
PGIP purchased the Loan Documents for a total purchase price of
approximately $5,548,000 (the "Purchase Price"), including amounts paid by
PGIP to First Union prior to the Closing Date, or approximately 61.6% of the
approximately $9,007,000 owed First Union by the Company under the Loan
Documents. PGIP borrowed $3,249,521 of the Purchase Price from First Union
(the "Notes"). The Notes bear interest at the prime rate as published in the
Wall Street Journal plus 1% and mature on June 1, 1997. Interest on the
Notes is payable monthly. As security for payment of its obligations under
the Notes, PGIP assigned to First Union all of PGIP's right, title and
interest in and to the Loan Documents.
The assignment of the Loan Documents to PGIP was pursuant to the terms and
conditions of that certain Note and Loan Documents Purchase Agreement dated
as of October 12, 1995, by and between First Union, PGIP and the Borrowers,
as amended by letter agreements dated November 10, 1995, December 15, 1995,
January 17, 1996 and February 16, 1996 and as further amended by that certain
Modification of Note and Loan Documents Purchase Agreement dated as of the
Closing Date.
In April 1994 the Company entered into a series of agreements (the Second
Secured Lender Transaction) wherein the Company sold the remainder of its
Southern Woods developed homesites inventory (approximately 72 homesites),
the remainder of the undeveloped acreage of Southern Woods (approximately 200
acres) and 162 prepaid water and sewer connections in exchange for a $2.4
million reduction in the principal due to its primary lender, a net $310,000
reduction in accrued interest due to the primary lender, the satisfaction of
$362,000 in other liabilities and additional closing costs of $71,000 (the
"Second Secured Lender Transaction"). Included in other income for 1994 is a
$1.5 million gain related to the sale of the Southern Woods development which
represents the excess of fair market value over carrying value of assets
exchanged.
In July 1992 the Company entered into a series of agreements (the Second
Secured Lender Transaction) executed on July 8, 1992 and closed on July 11,
1992, wherein the Company sold the remainder of its Citrus County developed
homesite inventory (approximately 1,300 homesites), 440 acres of Citrus
County undeveloped property, its Sugarmill Woods sales office and $4.7
million in receivables on homesite sales in exchange for a $13.7 million
reduction in collateralized liabilities and a $2.2 million reduction in
uncollateralized liabilities.
- 33 -
<PAGE> 34
Secured Lender Transactions (Cont.)
- ---------------------------
The 1,300 homesites, 90 acres, the sales office and the receivables were
sold without recourse to subsidiaries of the Company's primary lender,
BancFlorida, a Naples, Florida based federal savings and loan association
("BancFlorida"). The remaining 350 acres were conveyed to Love-PGI Partners,
L.P., holders of a portion of the Company's collateralized convertible
debentures. In addition to the closing proceeds, the Company has received
$649,000 as of December 31, 1994 with $11,000 yet to be received for working
capital from BancFlorida as receivable payments were collected by BancFlorida
on the acquired portfolio and remitted to the Company. The $1.4 million gain
associated with these transactions is included in other income in the
December 31, 1992 consolidated statement of operations.
3. Real Estate Sales and Other Income:
-----------------------------------
<TABLE>
Real estate sales and cost of sales consisted of:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Revenues:
Homesite sales $ 44,000 $ 240,000
Home sales - 2,340,000
Acreage sales 80,000 528,000
------------ -----------
$ 124,000 $ 3,108,000
============ ===========
Cost of Sales:
Homesites $ 56,000 $ 291,000
Homes - 2,324,000
Acreage 6,000 155,000
------------ -----------
$ 62,000 $ 2,770,000
============ ===========
Other income consisted of:
Gain on disposition of assets $ - $ 1,463,000
Commission income 277,000 270,000
Other income 393,000 353,000
------------ -----------
$ 670,000 $ 2,086,000
============ ===========
</TABLE>
4. Restricted Cash:
----------------
Restricted cash includes cash and certificates of deposit pledged to
agencies in various states and local Florida governmental units related to
land development and environmental matters, escrowed receipts related to
pledged receivables on real estate sales and the servicing of sold
receivables and, as a result of sales agreements and Company policies,
customer payments and deposits related to home site and housing contracts.
5. Receivables on Real Estate Sales:
---------------------------------
<TABLE>
Net receivables on real estate sales consisted of:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Contracts receivable on homesite sales $ 1,599,000 $ 2,187,000
Other 128,000 123,000
----------- -----------
1,727,000 (2,310,000)
Less: Allowance for cancellations (976,000) (976,000)
Unamortized valuation discount (69,000) (107,000)
------------ ------------
$ 682,000 $ 1,227,000
============ ============
</TABLE>
- 34 -
<PAGE> 35
Receivables on Real Estate Sales (Cont.)
- --------------------------------
Stated interest rates for contracts receivable on homesite sales, as well
as contracts and mortgages receivable on acreage sales, ranged up to 10% with
payment terms varying from seven to ten years. The weighted average
interest rate for such receivables outstanding at December 31, 1995 and 1994
was 9.35% and 9.38%, respectively.
The Company generally considers receivables on real estate sales delinquent
if the scheduled installment payment is over 30 days past due. At December
31, 1995 and 1994 delinquent receivables approximated $858,000 and $871,000,
respectively.
Contracts receivable on homesite sales and contracts and mortgages
receivable on acreage sales have been discounted to yield an effective
interest rate of 14%. Contracts receivable on homesite sales recorded under
the installment method have not been discounted.
The estimated scheduled principal collections for receivables on real
estate sales at December 31, 1995 are:
<TABLE>
<CAPTION>
<S> <C>
1996 $ 1,086,000
1997 397,000
1998 135,000
1999 40,000
2000 25,000
Thereafter 44,000
-----------
$ 1,727,000
===========
</TABLE>
In March 1988 the Company sold contracts receivable on homesite sales
totaling approximately $9,246,000, before consideration of a related
unamortized valuation discount of approximately $1,197,000 at the time of the
sale. For financial reporting purposes this transaction has been treated as
a financing transaction (see Note 10), since the Company may be required to
repurchase the contracts receivable on homesite sales under conditions other
than the recourse provision of the sales agreement. At December 31, 1995,
and 1994, contracts receivable on homesite sales of approximately
$1,599,000 and $2,187,000, respectively, and related unamortized valuation
discount of approximately $69,000 and $107,000, respectively, related to this
transaction have been included in the Company's reported receivables on real
estate sales.
At December 31, 1995, 62% of the Company's gross receivables from real
estate sales were generated by a broker in two geographic regions, certain
districts in New York City and Taiwan. These sales were under contract for
deed with terms similar to sales to other customers. This concentration of
credit risk has been considered by management in determining the allowance
for cancellations.
- 35 -
<PAGE> 36
6. Land and Improvements:
----------------------
<TABLE>
Land and improvement inventories consisted of:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Unimproved land $ 8,724,000 $ 8,730,000
Fully improved land 307,000 424,000
----------- -----------
$ 9,031,000 $ 9,154,000
=========== ===========
</TABLE>
7. Property and Equipment:
-----------------------
<TABLE>
Property and equipment consisted of:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Furniture, fixtures and other equipment $405,000 $407,000
Construction in progress - 2,000
--------- ---------
405,000 409,000
Less accumulated depreciation (324,000) (290,000)
--------- ---------
$ 81,000 $119,000
========= =========
</TABLE>
<TABLE>
Depreciation was:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Charged to expense $ 36,000 $ 46,000
Cost of sales - 5,000
-------- --------
$ 36,000 $ 51,000
======== ========
</TABLE>
8. Other Assets:
-------------
<TABLE>
Other assets consisted of:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Guaranteed future connections related to
sale of utility plants and equipment, net $621,000 $ 621,000
Prepaid loan and debenture costs 13,000 42,000
Deposit with Trustee of 6-1/2% debentures 120,000 114,000
Other 12,000 11,000
-------- --------
$766,000 $788,000
======== ========
</TABLE>
The guaranteed future connections are reflected net of discount of
$274,000 and deferred gain of $101,000 in both 1995 and 1994.
9. Other Liabilities:
------------------
<TABLE>
Other liabilities consisted of:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Accrued property taxes
- current $ 37,000 $ 238,000
- delinquent 249,000 303,000
Other accrued expenses 243,000 234,000
Deposits, advances and escrows 346,000 419,000
Estimated recourse liability for
receivables sold (Note 17) 252,000 300,000
Other 16,000 18,000
---------- ----------
$1,143,000 $1,512,000
========== ==========
</TABLE>
- 36 -
<PAGE> 37
10. Credit Agreements - Primary Lender and Notes and Mortgages Payable:
-------------------------------------------------------------------
Credit agreements with the Company's primary lender and notes and mortgages
payable consisted of the following:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Credit agreements - primary lender
(maturing July 8, 1997, bearing
interest at prime plus 1.5%):
Revolving land loan line of credit $ 4,297,000 $ 4,297,000
Receivable loan payable 2,705,000 2,705,000
Real estate taxes payable 70,000 -
Legal fees payable 15,000 -
----------- -----------
7,287,000 7,002,000
----------- -----------
Notes and mortgages payable -
$1,783,000 bearing interest at 12-1/4%,
$1,176,000 (subordinated to primary
lender) bearing interest at prime plus
2%, the remainder bearing interest at
varying rates to 23%; maturing through 2000 3,802,000 4,250,000
----------- -----------
$11,089,000 $11,252,000
=========== ===========
</TABLE>
The prime rate at December 31, 1995 was 8.5%.
At December 31, 1995 assets collateralizing the Company's credit agreements
with its primary lender and notes and mortgages payable were carried at
$10,750,000, of which $1,727,000 represented gross receivables on real estate
sales, $11,000 represented other receivables, $8,931,000 represented land and
improvement inventories, and $81,000 represented property and equipment.
The overall weighted average interest rate for the Company's credit
agreements with its primary lender and all remaining notes and mortgages was
approximately 11.1% as of December 31, 1995 and 9.6% as of December 31, 1994.
As discussed in Note 5, the Company's March 1988 sale of receivables on
real estate sales has been treated as a financing transaction for financial
reporting purposes since the Company may be required to repurchase these
receivables under conditions other than the recourse provision of the sales
agreement. Principal and interest payments are recorded by the Company based
on the collections from receivables applicable to the sale and the
application of the 12 1/4% interest rate used to calculate this sale's
discounted present value. At December 31, 1995 and 1994, the outstanding
principal balance for this financing transaction was approximately $1,783,000
and $2,253,000, respectively, and based on estimated collections of the
associated receivables on real estate sales, full repayment should be made by
1999.
The Company's credit agreement with its primary lender matured May 30,
1991. Effective July 1, 1991, the primary lender began charging
- 37 -
<PAGE> 38
Credit Agreement - Primary Lender and Notes and Mortgages Payable
- -----------------------------------------------------------------
(Cont.)
the Company at the default rate, prime plus 5%. In July 1992 the Company
sold to its primary lender the remainder of its Citrus County undeveloped
property, its Sugarmill Woods sales office and $4.7 million in receivables on
homesite sales in exchange for a $9.7 million principal reduction and the
payment of $2.7 million in interest due on its primary lender debt. In
addition to the debt reduction, the Company received a 5-year extension of
the maturity date of the remaining debt, an interest rate reduction to prime
plus 1-1/2% with an interest moratorium until August 1, 1993 and the
utilization of up to $670,000 for working capital as receivable payments are
collected by BancFlorida on the acquired portfolio and remitted to the
Company.
In August of 1993 the Company was unable to make its debt payment and again
defaulted on its primary lender debt. In April 1994 the Company entered into
a series of agreements wherein the Company sold the remainder of its Southern
Woods developed homesites inventory (approximately 72 homesites), the
remainder of the undeveloped acreage of Southern Woods (approximately 200
acres) and 162 prepaid water and sewer connections in exchange for a $2.4
million reduction in the principal due to its primary lender, a net $310,000
reduction in accrued interest due to the primary lender, the satisfaction of
$362,000 in other liabilities and additional closing costs of $71,000 (the
"Second Secured Lender Transaction"). Included in other income for 1994 is
$1.5 million gain related to the sale of the Southern Woods development which
represents the excess fair market value over carrying value.
Although substantially all of the Company's real and personal property
including all of the stock of the Company's wholly-owned subsidiaries remains
pledged as collateral, the Company negotiated agreements with its mortgage
holders to allow the Company to sell part of its land holdings without
requiring full payment of the secured debt.
Scheduled payments applicable to the reduction of principal amounts of all
primary lender debt based on the terms of the Company's primary lender credit
agreements, and all other notes and mortgages payable (without giving effect
to various cross-default provisions which could, upon formal notice,
accelerate payment of substantially all of the Company's debt and the
expressed intention of PGIP (see Note 2) to not proceed with collection) will
be required approximately as follows:
<TABLE>
<CAPTION>
<S> <C>
1996 2,454,000
1997 7,935,000
1998 -
1999 700,000
------------
$ 11,089,000
</TABLE>
- 38 -
<PAGE> 39
Credit Agreement - Primary Lender and Notes and Mortgages Payable
- -----------------------------------------------------------------
(Cont.)
The resulting principal and interest payable to its primary lender, due to
the sale of Southern Woods, retains a maturity date of July 8, 1997.
Effective with the closing, the Company's interest rate has been reduced from
the default rate of prime plus 5% to prime plus 1.5%.
Subsequent to year-end, the debt with First Union was purchased by PGIP
L.L.C. See Note 2 for the details of the transaction.
During the fiscal year ended December 31, 1995, the Company's business
focus and emphasis remained to concentrate its sales and marketing efforts
almost exclusively on the disposition in bulk of its undeveloped, platted,
residential real estate. This is due to continuing financial difficulties
from the principal and interest owed on its debt and management's
conclusion that a bulk sale was the best way to reduce the Company's debt
service obligations. If the Company is successful in its sale of this
undeveloped land, its remaining inventory will consist of undeveloped
commercial property. There can be no assurance that the Company will be
successful in its efforts to effect a bulk sale. Assuming a bulk sale
occurs, the Company intends to decide at that point whether it will pursue
the development and sale of the commercial property in accordance with its
traditional core business plans or whether it will attempt to sell such
property in bulk. That decision will depend, in part, on whether the
Company believes it can generate more revenue by developing and selling
individual commercial properties or by selling in bulk.
11. Convertible Subordinated Debentures Payable:
--------------------------------------------
<TABLE>
Convertible subordinated debentures payable consisted of:
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
6-1/2%, due June 1991, convertible into
shares of common stock at $18.00 per share $1,034,000 $1,034,000
6%, due May 1992, convertible into
shares of common stock at $19.50 per share 8,025,000 8,025,000
---------- ----------
$9,059,000 $9,059,000
========== ==========
</TABLE>
Since issuance, $650,000 and $152,000 of the 6-1/2% and 6% debentures,
respectively, have been converted.
The Company is currently in default of certain sinking fund and interest
payments on both convertible subordinated debentures, $9,059,000 in principal
plus accrued and unpaid interest totaling $3,552,000 at December 31, 1995.
- 39 -
<PAGE> 40
Convertible Subordinated Debentures Payable (Cont.)
- -------------------------------------------
The debentures are not collateralized and are not subordinated to each
other, but are subordinated to senior indebtedness ($12,589,000 at December
31, 1995). Payment of dividends on the Company's common stock is restricted
under the terms of the two indentures pursuant to which the outstanding
debentures are issued.
In order to satisfy the obligation to debenture holders, the Company has
been and intends to continue to:
- actively seek buyers for all or a portion of the undeveloped acreage;
- search for additional sources of equity; and
- determine if potential merger or joint venture candidates exist.
No assurances can be made that the Company can achieve any of the three
above alternatives.
12. Convertible Debentures Payable:
-------------------------------
In July and September 1989, the Company sold $1,282,000 and $1,000,000,
respectively, of convertible debentures to a partnership affiliated with the
Company's preferred shareholder. In connection with the July 1992 Secured
Lender Transaction in partial consideration for the conveyance of 350 acres
of property, the principal amount due to convertible debenture holders was
reduced by $782,000 and accrued interest thereon was reduced by $389,000
leaving a balance of $1,500,000. The debentures, with a maturity of July 8,
1997 accrue interest at 14% compounded quarterly. The Company's primary
lender credit agreements, however, prohibit the payment of interest until
such time as the primary lender loans are repaid. Each month, to the extent
interest on the Convertible Debentures is not paid in cash, the number of
shares into which the Convertible Debentures are convertible will increase.
If no interest is paid prior to maturity, at maturity the Convertible
Debentures purchased on July 24, 1989, will be convertible into 868,788
shares and those purchased on September 29, 1989, will be convertible into
1,726,568 shares, or a total of 2,595,356 shares of common stock. The
debentures are convertible into common stock at an initial conversion price
of $1.72 per share. The conversion price may be adjusted upon the occurrence
of certain events.
Accrued interest was $2,076,000 and $1,616,000 at December 31, 1995 and
1994, respectively. The debentures are collateralized by a second mortgage
on an approximately 650 acre tract of land in Citrus County, Florida.
13. Income Taxes:
-------------
Reconciliation of the statutory federal income tax rates, 34% for the years
ended December 31, 1995 and 1994, to the Company's effective income tax rates
follows:
- 40 -
<PAGE> 41
Income Taxes (Cont.)
- ------------
<TABLE>
<CAPTION>
1995 1994
---- ----
($ in thousands) (in thousands)
Percent of Percent of
---------- ----------
Amount of Tax Pre-tax Loss Amount of Tax Pre-tax Loss
------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
"Expected tax (credit) $(444) (34.0%) $(444) (34.0%)
State income taxes, net of federal tax benefits (47) (3.6) (47) (3.6)
Valuation allowance provided 491 37.6 491 37.6
-------- ------ ------- ------
$ - - % $ - - %
</TABLE>
Effective January 1, 1993 the Company adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which
requires a change from the deferred method to the asset and liability method
of accounting for income taxes. Under the asset and liability method,
deferred income taxes are recognized for the tax consequences of "temporary
differences" by applying enacted statutory tax rates applicable to future
years to differences between the financial statement carrying amounts and the
tax bases of existing assets and liabilities. Under SFAS No. 109, the effect
on deferred taxes of a change in tax rates is recognized in income in the
period that includes the enactment date. Under the deferred method, deferred
taxes were recognized using the tax rate applicable to the year of the
calculation and were not adjusted for subsequent changes in the tax rates.
Based on the Company's current tax status and current tax laws, adoption of
SFAS No. 109 did not have a material effect on the Company's financial
position.
At December 31, 1994, the Company had an operating loss carryforward of
approximately $28,000,000 which will expire at various dates through 2009.
In addition, the Company had unused investment tax credits of approximately
$731,000 which will expire at varying dates through 2000.
The following summarizes the temporary differences of the Company at the
current statutory rate:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax asset:
Net operating loss carryover $ 10,352,000 $10,352,000
Revenue recognition differences on homesite sales - -
Adjustments to reduce land to net realizable value 311,000 311,000
Expenses capitalized under IRC 263(a) 57,000 57,000
ITC carryforward 731,000 731,000
Other 7,000 7,000
Valuation allowance (8,972,000) (8,972,000)
---------- ----------
2,486,000 2,486,000
Deferred tax liability:
Basis difference of land and improvement inventories 2,452,000 2,452,000
Excess tax over book depreciation 34,000 34,000
---------- ----------
2,486,000 2,486,000
Net deferred tax asset $ 0 $ 0
</TABLE>
- 41 -
<PAGE> 42
14. Capital Stock:
--------------
In March 1987 the Company sold in a private placement 1,875,000 shares of
its Class A cumulative convertible preferred stock to a limited partnership
("Partnership") for a purchase price of $7,500,000 cash ($4.00 per share).
The Company also converted $500,000 of indebtedness owed to a corporation
owned by the Company's former Chairman of the Board of Directors and
members of his family into 125,000 shares of the cumulative convertible
preferred stock.
The holders of the preferred stock are entitled to one vote per share and,
except as provided by law, will vote as one class with the holders of the
common stock. Class A preferred stockholders are also entitled to receive
cumulative dividends at the annual rate of $.32 per share, an effective yield
of 8%. Dividends accrued for an initial two year period and, at the
expiration of this period, preferred stockholders had the option of receiving
accumulated dividends, when and if declared by the Board of Directors, in
cash (unless prohibited by law or contract) or common stock. At December 31,
1995 cumulative preferred dividends in arrears totaled $4,696,000 ($640,000
of which related to the year ended December 31, 1995).
The preferred stock was convertible at the option of the holders into
common stock at an initial conversion price of $2.41 per share (equivalent to
1.66 shares of common stock for each share of preferred stock), subject to
adjustment in certain events. As a result of the 1989 issuance of the
convertible debentures payable, the conversion price was adjusted to $2.13
per share.
Prior to March 25, 1995 the Company shall not have the right to call or
redeem the preferred stock without the consent of 66-2/3% of all the shares
of preferred stock at the time outstanding. On or after March 25, 1995 the
preferred stock will be callable or redeemable at the option of the Company
at $4.00 per share plus accrued and unpaid dividends. In addition, the
preferred stock will be entitled to preference of $4.00 per share plus
accrued and unpaid dividends in the event of liquidation of the Company.
At December 31, 1995 the Company had reserved 6,684,341 common shares for
the conversion of preferred stock and debentures, and for the exercise of
stock options.
15. Stock Options:
--------------
The Company has an incentive stock option plan which provides for the
granting of options to officers and key employees to purchase up to an
aggregate of 350,000 shares of the Company's common stock at not less than
the fair market value of the stock at the time such incentive stock options
are granted.
The Company has also adopted a non-qualified stock option and stock
appreciation rights plan which provides for the granting of options and/or
stock appreciation awards to key employees to
- 42 -
<PAGE> 43
Stock Options (Cont.)
- -------------
purchase up to an aggregate of 500,000 shares of the Company's common stock
at not less than 50% of the fair market value of the stock at the time such
non-qualified stock options and/or appreciation awards are granted.
There were no stock options outstanding at December 31, 1995.
16. Quarterly Results:
------------------
During the fourth quarter of 1995, accrued real estate taxes of $120,000
were reversed as a result of a positive decision from the State of Florida on
an agricultural exemption status for 1995 taxes on the Citrus County
unimproved land.
17. Commitments and Contingencies:
------------------------------
The Company is a party to a number of lawsuits incidental to the normal
operation of its business.
Two cases involve Sugarmill Woods, Inc. and Citrus County County Tax
Collector. In 1994, Citrus County County Tax Appraiser denied agricultural
exemption status for the undeveloped Sugarmill Woods property and the Company
was forced to sue the County to reclaim the tax benefit. In 1995, the Citrus
County County Tax Appraiser again denied agricultural exemption status for
the undeveloped Sugarmill Woods property, but was overruled by the Value
Adjustment Board of Citrus County. As a result, the Tax Appraiser has sued
Sugarmill Woods. At this time the outcome of the litigation cannot be
determined.
The aggregate outstanding balances of receivables sold or exchanged with
recourse by the Company, not including those receivables associated with the
March 1988 financing transaction previously discussed in Notes 5 and 19,
totaled approximately $384,000 and $618,000 at December 31, 1995 and 1994,
respectively. Based on its collection experience with such receivables, the
Company maintained an allowance at December 31, 1995 and 1994 classified in
other liabilities, of approximately $252,000 and $300,000 respectively for
the recourse provisions related to all receivables sold.
Under the terms of the receivables sale agreements the Company must
repurchase contracts greater than 90 days past due or exchange current
contracts owned by the Company. The repurchase price is equal to the
outstanding principal balance of the delinquent contract plus accrued
interest. At December 31, 1995, sold contracts receivable greater than 90
days past due totaled approximately $16,000. The related accrued interest is
considered immaterial.
- 43 -
<PAGE> 44
Commitments and Contingencies (Cont.)
- -----------------------------
The Company currently leases office space for its corporate headquarters
and its administrative operations and certain office equipment under
operating leases. During 1995 and 1994, the Company incurred expenses of
$31,000 and $113,000, respectively, related to these leases.
18. Related Party Transactions:
---------------------------
On March 28, 1996 (the "Closing Date"), the Company's primary lender, First
Union National Bank of Florida, a national banking association ("First
Union") assigned to PGIP L.L.C., a Missouri limited liability company
("PGIP") all of First Union's right, title and interest in and to the
documents (the "Loan Documents") evidencing and securing its primary credit
agreements with the Company and the Company's subsidiaries, Sugarmill Woods,
Inc., Burnt Store Marina, Inc. and Gulf Coast Credit Corporation
(collectively, the "Borrowers"), which credit agreements are in default and
the maturity of the indebtedness secured thereby has been accelerated.
PGIP is managed by Love Savings Holding Company ("LSHC"), Andrew S. Love,
Jr. and Laurence A. Schiffer. Messrs. Love and Schiffer are directors and
executive officers of LSHC and own slightly more than half of all the issued
and outstanding voting stock of LSHC. Messrs. Love and Schiffer serve as
executive officers and directors of the Company and indirectly hold interests
in debt and equity securities of the Company.
PGIP purchased the Loan Documents for a total purchase price of
approximately $5,548,000 (the "Purchase Price"), including amounts paid by
PGIP to First Union prior to the Closing Date, or approximately 61.6% of the
approximately $9,007,000 owed First Union by the Company under the Loan
Documents. PGIP borrowed $3,249,521 of the Purchase Price from First Union
(the "Notes"). The Notes bear interest at the prime rate as published in the
Wall Street Journal plus 1% and mature on June 1, 1997. Interest on the
Notes is payable monthly. As security for payment of its obligations under
the Notes, PGIP assigned to First Union all of PGIP's right, title and
interest in and to the Loan Documents.
The assignment of the Loan Documents to PGIP was pursuant to the terms and
conditions of that certain Note and Loan Documents Purchase Agreement dated
as of October 12, 1995, by and between First Union, PGIP and the Borrowers,
as amended by letter agreements dated November 10, 1995, December 15, 1995,
January 17, 1996 and February 16, 1996 and as further amended by that certain
Modification of Note and Loan Documents Purchase Agreement dated as of the
Closing Date.
In January, 1994 the Company's President, Paula McQueen retired after 28
years of employment. Pursuant to the terms of an Employment Agreement
executed on March 27, 1987, the Company owed termination pay in the amount of
$50,000, $13,000 for services rendered during the month of January 1994, as
well as reimbursement
- 44 -
<PAGE> 45
Related Party Transactions (Cont.)
- --------------------------
for business expenses incurred by the employee. In order to conserve its
operating cash, the Company negotiated an agreement whereby property was
transferred at its appraised value in full satisfaction of the amount due.
The property transferred was subject to approximately $11,000 in delinquent
and current year taxes, as well as closing costs. The Company transferred
additional Lots and $6,400 in furniture in lieu of the cash payment of these
closing costs. The additional lots were transferred at the same value as
that paid by third party purchasers of comparable property. The value of the
furniture was equal to 50% of its 1989 acquisition cost and exceeded that
which the Company would have realized in a sale of the furniture to a third
party purchaser.
The Company continued to utilize the services of the retired President
subsequent to her termination. During 1995 and 1994, a certified public
accounting firm in which the former President is a partner was paid for
rendered services totaling $24,572 and $47,437, respectively. In 1994, to
conserve operating cash, the Company negotiated an agreement whereby property
was transferred at the same prices paid by third party purchasers for
comparable property. Additional property to cover the cost of delinquent
and current year taxes, as well as transfer costs was also conveyed at the
same value paid by third party purchasers for comparable property.
In 1994, the Company moved its administration and accounting offices to the
offices of LREC in St. Louis, Missouri. LREC, which is an affiliate of
Love-PGI, the Company's preferred shareholder, is located at 515 Olive Street,
Suite 1400, St. Louis, Missouri 63101. A fee of $8,350 per month is paid to
LREC as reimbursement and compensation.
The following services are provided to the Company by LREC:
1. Maintain books of original entry;
2. Prepare quarterly and annual SEC filings;
3. Coordinate the annual audit;
4. Assemble information for tax filing, review reports as prepared by tax
accountants and file same;
5. Track shareholder records through transfer agent;
6. Maintain policies of insurance against property and liability exposure;
7. Handle payroll and benefits for Sugarmill location; and
8. Handle day-to-day accounting requirements.
In addition, the Company receives office space, telephone service and
computer service from LREC.
In 1995 and 1994, an affiliate of Love-PGI, the Company's Preferred
Shareholder, Love Investment Company, made uncollateralized loans to the
Company, which at December 31, 1995 and 1994 had a total outstanding balance,
excluding accrued interest, of $60,000 and $35,000, respectively.
- 45 -
<PAGE> 46
Related Party Transaction (Cont.)
- -------------------------
In September, 1995 and August, 1994 the Company sold Promissory Notes and
Mortgages with principal balances of $180,000 and $36,000, respectively, to
Love Real Estate Company Profit Sharing Plan (1994), an affiliate company of
Love-PGI Partners, the Company's Preferred Shareholder.
In August of 1994 the Company sold a Promissory note and Mortgage with a
principal balance of $100,000 to Love Group Joint Venture, an affiliate
company of Love-PGI Partners, the Company's Preferred Shareholder.
Pursuant to the terms of the 1987 preferred stock private placement
agreement, the Company accrued $49,000 and $54,000 in management consulting
fees during 1995 and 1994, respectively, to a company affiliated with the
Partnership's managing general partner. Only $10,000 of these fees were paid
in 1995 and no payment was made in 1994. See Secured Lender Transaction
under Note 2.
In 1985 a corporation owned by the former Chairman of the Board and his
family made an uncollateralized loan to the Company which at December 31,
1995 had an outstanding balance, including accrued interest, of $339,000.
In April 1985 the Company sold its former administration building, located
in Punta Gorda, Florida, to a corporation owned and operated by the husband
of the Company's former President, Secretary-Treasurer and subsequently
entered into a leaseback of a portion of the building on terms similar to
those negotiated by other tenants. During 1995 and 1994, the Company paid
$7,000 and $58,000, respectively, in rent, common area cost and utilities
related to this leased office space.
19. Fair Value of Financial Instruments
- -----------------------------------------
The following methods and assumptions were used to estimate the fair value
of each class of financial instrument for which it is practicable to estimate
that value:
Cash and Short-term Investments:
The carrying amount approximates fair value because of the short maturity
of those instruments.
Real Estate Receivables:
The fair value of real estate receivables is estimated by discounting the
future cash flows using current rates at which similar receivables would be
made to borrowers with similar credit ratings and for the same remaining
maturities.
- 46 -
<PAGE> 47
Long-term Debt:
The fair value of the Corporation's long-term debt is estimated based on
the transaction discussed in Note 2. It was not practicable to estimate the
fair value of the remaining notes payable because the other notes are in
default and no basis for estimating value by reference to quoted market
prices or on current rates offered to the Corporation for debt of the same
remaining maturities.
Accounts Payable:
The carrying amount approximates fair value because of the short-term
maturity of those debts. The estimated fair values of the Corporations'
financial instruments are as follows:
<TABLE>
<CAPTION>
Carrying Fair
-------- ----
1995 Amount Value
---- ------ -----
<S> <C> <C>
Cash and short-term investments $1,165,000 $1,165,000
Principal plus accrued interest
receivable on real estate $ 682,000 $ 682,000
Accounts payable $ 91,000 $ 91,000
Long-term debt
Primary Lender $8,828,000 $5,548,000
Other $21,291,000 $
</TABLE>
- 47 -
<PAGE> 48
PART III
--------
Item 9. Directors and Executive Officers of the Registrant
- ------- --------------------------------------------------
IDENTIFICATION OF DIRECTORS
<TABLE>
The following table indicates Directors of the Company as of March 25,
1996:
<CAPTION>
Position with Company and Business
----------------------------------
Name and Age Experience During Last Five Years
- ------------ ---------------------------------
<C> <S>
Andrew S. Love, Jr. (age 52) <F1> Chairman of the Company's Board of
Directors since May 1987; Secretary since
February 1994; Chairman of the Board of Love
Real Estate Company and Secretary of Love
Investment Company since 1973; Partner in St.
Louis based law firm of Bryan, Cave, McPheeters
& McRoberts until 1991; Director of Heartland
Savings Bank since December 1985.
Laurence A. Schiffer (age 56) <F1> Vice Chairman of the Company's Board of
Directors since May 1987; President and Chief
Executive Officer since February 1994;
President and Chief Executive Officer of Love
Real Estate Company and Love Investment Company
since 1973; Member of the Real Estate Board of
Metropolitan St. Louis and the National
Association of Real Estate Boards; Chairman of
Heartland Savings Bank since December 1985.
<FN>
- --------------------------------
<F1> Member of the Executive Committee.
</TABLE>
EXECUTIVE OFFICERS OF THE REGISTRANT
The following information, regarding executive officers of the Company at
March 25, 1996, is provided pursuant to Instruction 3 to Item 401(b) of
Regulation S-B, as amended, and General Instruction G(3) to Form 10-KSB.
- 48 -
<PAGE> 49
EXECUTIVE OFFICERS OF THE REGISTRANT (Cont.)
- ------------------------------------
<TABLE>
<CAPTION>
Position with Company and Business
----------------------------------
Name and Age Experience During Last Five Years
------------ ---------------------------------
<C> <S>
Laurence A. Schiffer (age 56) Director of the Company since April 1987;
President and Chief Executive Officer of the
Company since February 1994; Vice Chairman of
the Board since May 1987; President and Chief
Executive Office of Love Real Estate Company
and Love Investment Company since 1973.
Andrew S. Love, Jr. (age 52) Chairman of the Company's Board of Directors
since May 1987; Secretary since February 1994;
Chairman of the Board of Love Real Estate
Company and Secretary of Love Investment
Company since 1973; Partner in St. Louis based
law firm of Bryan, Cave, McPheeters & McRoberts
until 1991; Director of Heartland Savings Bank
since December 1985.
</TABLE>
Executive officers of the Company are appointed annually by the Board of
Directors to hold office until their successors are appointed and qualify.
Item 10. Executive Compensation
- -------- ----------------------
The following table summarizes the total compensation paid to the Chief
Executive Officer for fiscal year 1995, as well as total compensation paid
for the Company's previous fiscal years:
<TABLE>
<CAPTION>
Other Annual Long Term All Other
Name & Position Year Salary Bonus Compensation Compensation Compensation
--------------- ---- ------ ----- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Laurence A. Schiffer 1995 -0- -0- -0- -0- -0-
Paula F. McQueen 1995 -0- -0- -0- -0- $25,000
President, CEO 1994 $ 13,000 -0- -0- -0- $47,000
1993 $104,000 -0- -0- -0- -0-
</TABLE>
The Company has both a qualified and a non-qualified stock option plan and a
stock appreciation rights plan. No options under either plan or stock
appreciation rights are outstanding at December 31, 1995.
On March 25, 1987, the Company entered into an Employment Agreement with
Paula F. McQueen. Mrs. McQueen's Employment Agreement provided that the
Company would employ her in the capacity of Senior Vice President and
Secretary-Treasurer for a period of one year commencing March 25, 1987, at a
base salary of $100,000 per year. Mrs. McQueen's Agreement was renewed for
another year in March 1988, 1989, 1990, 1991 and 1992 on substantially the
same terms. In March 1990, Mrs. McQueen was appointed President of the
Company and her compensation was increased to $156,000 shortly thereafter.
A portion of Mrs. McQueen's 1993 compensation was not paid until 1994.
- 49 -
<PAGE> 50
Executive Compensation (Cont.)
- ----------------------
No fees were paid to directors for attending meetings during 1995.
Item 11. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
Ownership of Certain Beneficial Owners
--------------------------------------
The table below sets forth as of March 25, 1996 the names and addresses of
the only persons of whom the Company is aware beneficially own more than 5%
of the outstanding Common Stock, par value $.10, of the Company, except that
certain brokerage houses may hold of record more than 5% of such outstanding
shares for the accounts of their various customers. It also contains as of
the same date, the names and addresses of the only persons of whom the
Company is aware beneficially own more than 5% of the outstanding Preferred
Stock, $1.00 par value, of the Company.
<TABLE>
<CAPTION>
Amount and
----------
Nature of Percent of
--------- ----------
Beneficial Percent of Company
---------- ---------- -------
Title of Class Name and Address of Beneficial Owner Ownership Class Vote
- -------------- ------------------------------------ --------- ----- ----
<C> <S> <C> <C> <C>
Common Stock Estate of Harold Vernon 998,777<F1><F2> 30.1% 18.8%
($.10 par value) 3201 W. Rolling Hills Circle
Fort Lauderdale, FL 33328
Alfred M. Johns 312,401<F3> 9.4% 5.9%
One Woodland Drive
Punta Gorda, FL 33950
Love-PGI Partners, L.P. 385,516<F4> 11.6% 7.3%
515 Olive Street, Suite 1400
St. Louis, MO 63101
All officers and directors as a group (3 persons) 385,516 11.6% 7.3%
Preferred Stock Love-PGI Partners, L.P. 1,875,000<F4> 93.75% 35.3%<F5>
(Class A) ($1.00 515 Olive Street, Suite 1400
par value) St. Louis, MO 63101
Alfred M. Johns 125,000<F6> 6.25% 2.4%
One Woodland Drive
Punta Gorda, FL 33950
<FN>
- ----------------------------
<F1> The executor of the Estate of Harold Vernon has sole voting and
investment power. The shares are currently in the possession of the
Federal Deposit Insurance Corporation ("FDIC") which is the receiver
for First American Bank and Trust, Lake Worth, Florida ("First
American"). First American previously made a loan to Mr. Vernon which
was secured by these shares. The loan is in default and the Company
understands the FDIC has the right, pursuant to a pledge agreement, to
vote the shares at any annual or special meeting of shareholders.
The Company has been advised that the FDIC does not intend to exercise
this right and vote these shares.
- 50 -
<PAGE> 51
Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------
Ownership of Certain Beneficial Owners (Cont.)
- --------------------------------------
<F2> Information obtained from filings made with the Securities and
Exchange Commission.
<F3> Shared voting and investment power. Includes 10,100 shares owned
by Mr. Johns' wife. Does not include the shares listed in Note 6
below.
<F4> The shares of Preferred Stock were sold pursuant to the terms of a
Preferred Stock Purchase Agreement (the "Agreement") entered into
between Love Development and Investment Company ("LDIC") and the
Company in 1987. LDIC subsequently assigned its rights under the
Agreement to Love-PGI Partners, L.P. ("Love"). Andrew S. Love, Jr.,
Chairman of the Board of the Company, is the Chairman and the principal
stockholder of Love Investment Company ("LIC"), the managing general
partner of Love. The shares are convertible into 3,537,735 shares of
Common Stock which are not reflected in the above table. The shares of
Preferred Stock are subject to a pledge agreement in favor of and the
shares are consequently held by, a savings and loan association which
is currently in receivership.
In 1989, the Company also sold an aggregate $2,282,451 of its
Convertible Secured Debentures due April 30, 1991 (the "1989
Debentures"), to Love-1989 Florida Partners, L.P. ("Love-1989"), and
affiliate of Love. Love-1989 has since transferred a portion of the
1989 Debentures to Love in repayment of a debt and a portion was
transferred to a limited partner of Love-1989 upon its withdrawal from
the limited partnership. In connection with the July 1992 Secured
Lender Transaction (See Item 7 and Note 2 to the consolidated financial
statements under Item 8), the outstanding balance was reduced by
$782,000. The 1989 Debentures, as of March 25, 1995, were convertible
into 1,631,090 shares of Common Stock, which are not reflected in the
above table. See "Certain Relationships and Related Transactions"
below. However, because of the relationship among the former limited
partner, Love-1989 and Love, it is assumed for the purposes hereof that
if any 1989 Debentures were converted, all would be converted and all
such Common Stock into which the 1989 Debentures would be converted
would vote similarly. If the conversion rights of the Preferred
Stock and the 1989 Debentures were exercised in full, Love, Love-1989
and the former limited partner together would directly control 63.0% of
the Company's voting shares assuming the other holder of the Preferred
Stock did not convert its shares into Common Stock.
<F5> As part of the Agreement, the Company granted Love the option to
purchase as many shares of Common Stock as the Company had reserved
under options, warrants, calls, conversion privileges or other rights
as of March 25, 1987 ("Purchase Rights"), the date the Agreement was
closed. As of that date the Company had Purchase Rights covering
676,900 shares at prices ranging from $3.375 to $19.50 per share.
These option shares are not included in the "Percent of Company Vote"
column because they only become exercisable to the extent the Purchase
Rights are exercised.
- 51 -
<PAGE> 52
Security Ownership of Certain Beneficial Owners and Management
- --------------------------------------------------------------
Ownership of Certain Beneficial Owners (Cont.)
- --------------------------------------
<F6> Shared voting and investment power with his wife. These shares
are convertible into 235,849 shares of Common Stock which are not
reflected in the above table. If the conversion rights of the
Preferred Stock were exercised in full, these shares, plus the shares
of Common Stock shown as beneficially owned by Mr. Johns above, would
represent 10.1% of the Company vote assuming the other holder of the
Preferred Stock did not convert its shares into Common Stock.
</TABLE>
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth as of March 25, 1996 the amount and
nature of beneficial ownership of the Common Stock and Preferred Stock
of the Company held by the Company's directors and by all executive
officers and directors as a group.
<TABLE>
<CAPTION>
Amount and Nature of Amount and Nature of
Beneficial Ownership of Beneficial Ownership
Common Stock At % of of Preferred Stock At % of % of Company
Name and Age March 25, 1996 Class March 25, 1996 Class Vote
- ------------ -------------- ----- -------------- ----- ----
<S> <C> <C> <C> <C> <C>
Andrew S. Love, Jr. <F1> 385,516 <F2> 11.6% 1,875,000 <F3> 93.75% 42.5% <F3>
Laurence A. Schiffer <F1> None <F5> - None <F5> - -
All Officers and Directors as
a Group (2 persons) 385,516 <F5> 11.6% 1,875,000 93.75% 42.6%
<FN>
- ---------------------------
<F1> Member of the Executive Committee.
<F2> Shares of Common Stock owned by Love. See Note 4 of "Voting
Securities and Principal Holders Thereof."
<F3> Shares of Preferred Stock owned by Love. The 1,875,000 shares of
Preferred Stock are convertible into 3,537,735 shares of Common
Stock. If the right to convert these shares were fully exercised,
these shares, added to the 385,516 shares of Common Stock owned by
Love, would represent 57.2% of all the Common Stock.
<F4> Less than 1%.
<F5> Excludes 1,875,000 shares of Preferred Stock which are convertible
into 3,537,735 shares of Common Stock owned by Love, and any shares of
Common Stock into which the 1989 Debentures are convertible. See Note
4 of "Voting Securities and Principal Holders Thereof".
</TABLE>
Item 12. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
The Company in order to conserve cash and permit management to concentrate
on achieving a sale of all or a portion of the acreage has moved its
administration and accounting offices to the offices of
- 52 -
<PAGE> 53
Certain Relationships and Related Transactions (Cont.)
- ----------------------------------------------
the Love Real Estate Company in St. Louis, Missouri. Love Real Estate
Company ("Love"), which is an affiliate of Love-PGI, the Company's preferred
shareholder, is located at 515 Olive Street, Suite 1400, St. Louis, Missouri
63101. A fee of $8,350 per month is paid to the Love Companies as
reimbursement and compensation.
The following services are provided to the Company by Love:
1. Maintain books of original entry;
2. Prepare quarterly and annual SEC filings;
3. Coordinate the annual audit;
4. Assemble information for tax filing, review reports as prepared by tax
accountants and file same;
5. Track shareholder records through transfer agent;
6. Maintain policies of insurance against property and liability exposure;
7. Handle payroll and benefits for Sugarmill location; and
8. Handle day-to-day accounting requirements.
In addition, the Company receives office space, telephone service and
computer service from Love.
Effective as of March 25, 1987, the Company entered into a Management
Consulting Agreement with Love Real Estate Company ("Love Company"), a
Missouri corporation affiliated with Love. As a consultant to the Company,
Love Company provides services which may include, but are not limited to,
strategic planning, marketing and financing, as requested by the Company. In
consideration for these consulting services, the Company will pay Love
Company a quarterly consulting fee of one-tenth of one percent of the book
value of the Company's assets, plus reasonable out-of-pocket expenses. As of
December 31, 1995 the book value of the Company's assets was approximately
$12.0 million. Consulting fees totaling $49,000 and $54,000 were accrued
during 1995 and 1994, of which $10,000 was paid in 1995. In connection with
the July 1992 Secured Lender Transaction, accrued management fees were
reduced by $1,042,000 as partial consideration for the conveyance of the
350 acres of property transferred to Love-PGI Partners, L.P. ("L-PGI").
The consulting agreement will continue in effect until terminated upon 90
days prior written notice by a majority vote of the Company's directors who
have no financial interest in Love Company or in any Love Company
affiliated entity.
Love-1989 Florida Partners, L.P., a Missouri limited partnership ("New
Partnership"), which is affiliated with L-PGI, purchased $1,282,000 of the
Company's convertible debentures at face amount on July 24, 1989. The
convertible debentures, and all accrued interest at 14% per annum thereon,
are convertible into common stock at an initial conversion price of $1.72 per
share. Upon issuance, the convertible debentures were convertible into
745,611 shares of common stock. On September 29, 1989, the New Partnership
purchased an additional $1,000,000 of convertible debentures at face amount
which were convertible into 581,395 shares of common stock. The convertible
- 53 -
<PAGE> 54
Certain Relationships and Related Transactions (Cont.)
- ----------------------------------------------
debentures are collateralized by a second mortgage on approximately 650 acres
of Company owned property.
The Company's primary lender credit agreements, however, prohibit the
payment of interest on the convertible debentures until such time as the
primary lender loans are repaid. Each month, to the extent interest on the
convertible debentures are not paid in cash, the number of shares into which
the convertible debentures are convertible will increase. If no interest is
paid prior to maturity, at maturity the convertible debentures purchased by
the New Partnership on July 24, 1989, will be convertible into 868,788 shares
and those purchased on September 29, 1989, will be convertible into 1,726,568
shares, or a total of 2,595,356 shares of common stock.
The New Partnership's purchase of the convertible debentures was funded by
a loan from L-PGI. The New Partnership has since repaid the debt in full, in
part by transferring $782,000 of the convertible debentures purchased on July
24, 1989, to L-PGI. In connection with the July 1992 Secured Lender
Transaction as partial consideration for the conveyance of 350 acres of
property, L-PGI's convertible debenture was reduced by $782,000 principal
and $389,000 accrued interest. The maturity date on all of the remaining
Convertible Debentures was extended to July 8, 1997.
During 1995 and 1994, the Company made payments of $8,000 and $21,000,
respectively, for insurance premiums to Hilb, Rogal & Hamilton Company of
Tampa Bay, whose Executive Vice President and major stockholder, John W.
Veghte, was a director of the Company until his resignation in June 1993.
In April 1985 the Company sold its former administration building located
in Punta Gorda, Florida to McCo, Inc. ("McCo"), a corporation owned and
operated by the husband of Mrs. Paula McQueen, the Company's former President
and Secretary and Treasurer and subsequently entered into a leaseback of a
portion of the building on terms similar to those negotiated by other
tenants. During 1995 and 1994, the Company paid $7,000 and $58,000,
respectively, to McCo for rent, common area costs and utilities related to
this leased office space.
In 1985 a corporation owned by Alfred M. Johns, the former Chairman, and
his family made an uncollateralized loan to the Company which at December 31,
1995 had an outstanding balance, excluding accrued interest, of $176,000.
The Company believes that the foregoing transactions were on terms
comparable to those which would have been obtained from unaffiliated
persons.
- 54 -
<PAGE> 55
Item 13. Exhibits and Reports on Form 8-K
- -------- --------------------------------
<TABLE>
<CAPTION>
Form 10-KSB
Page No.
--------
<C> <S> <C>
(a) 1. Financial Statements
Report of Independent Accountants 24-25
-------
Consolidated Statements of Financial Position
December 31, 1995 and 1994 26
-------
Consolidated Statements of Operations Years Ended
December 31, 1995 and 1994 27
-------
Consolidated Statements of Cash Flows Years Ended
December 31, 1995 and 1994 28-29
-------
Consolidated Statements of Stockholders' Deficiency
years Ended December 31, 1995 and 1994 30
-------
Notes to Consolidated Financial Statements 31-45
-------
(a) 2. Exhibits
Reference is made to the Exhibit Index contained on pages 59 to 64
herein for a list of exhibits filed under this Item.
(b) Reports on Form 8-K.
Form 8-K, with exhibits, related to the Company's Forbearance
Agreement with the primary lender was filed November 1, 1995.
(c) See the Exhibit Index contained on pages 59 to 64 herein for a list of
each management contract, compensatory plan or arrangement required to
be filed pursuant to Item 14(c) of this report: Exhibits 10.1, 10.2,
10.4, and 10.5.
(d) None
</TABLE>
- 55 -
<PAGE> 56
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the registration statement
of PGI Incorporated and subsidiaries on Form S-8 (File 2-77149) of our report
dated April 5, 1996, relating to the consolidated financial statements of PGI
Incorporated and subsidiaries which report is included in this Annual Report
on Form 10-KSB. Our report contains an explanatory paragraph regarding
uncertainty as to the ability of the Company to continue as a going concern.
St. Louis, Missouri
April 12, 1996 BDO Seidman LLP
- 56 -
<PAGE> 57
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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, in the City of
St. Louis, State of Missouri, on this 15th day of April, 1996.
PGI INCORPORATED
(Registrant)
By: /s/Laurence A. Schiffer
--------------------------
Laurence A. Schiffer, President
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Laurence A. Schiffer and Andrew S. Love, Jr.,
and each of them, his true and lawful attorneys-in-fact and agents, with full
power of substitution and re-substitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
Report, and to file the same, with all exhibits thereto, and other documents
in connection there with, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents full power and authority to
do and perform each and every act and thing requisite and necessary to be
done in and about the premises, as fully to all intents and purposes as they
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
- 57 -
<PAGE> 58
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons in the capacities and
on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<C> <S> <C>
/s/Andrew S. Love, Jr. Chairman of the Board April 15, 1996
- ------------------------------------ Secretary
Andrew S. Love, Jr.
/s/Laurence A. Schiffer Vice Chairman of the April 15, 1996
- ------------------------------------ Board
Laurence A. Schiffer President
Principal Executive
Officer since February
1994
/s/Gloria D. Clement Chief Financial April 15, 1996
- ------------------------------------ Officer
Gloria D. Clement
/s/Annette M. Kovarik Chief Accounting April 15, 1996
- ------------------------------------ Officer
Annette M. Kovarik
</TABLE>
- 58 -
<PAGE> 59
<TABLE>
<CAPTION>
EXHIBIT INDEX
- -------------
Sequential
Page Number
<C> <S> <C>
3.1 Articles of Incorporation (filed as Exhibit 3.1 to Registrant's
Form 10-K Annual Report for the year ended December 31, 1980 and
incorporated herein by reference).
3.2 Certificate of the Designation, Powers, Preferences and Relative
Rights, and the Qualifications, Limitations or Restrictions Thereof,
which have not been set forth in the Articles of Incorporation, of the
Class A Cumulative Convertible Preferred Stock, effective as of March
24, 1987 (filed as Exhibit 3.2 to Registrant's Form 10-K Annual Report
for the year ended December 31, 1986 ("1986 Form 10-K") and
incorporated herein by reference).
3.3 Bylaws of Registrant, as amended September 1987 (filed as Exhibit
3.3 to Registrant's original Form 10-K Annual Report for the year ended
December 31, 1987 ("Original 1987 Form 10-K") dated as of March 29,
1987 and incorporated herein by reference).
3.4 Amendments to the Articles of Incorporation effective March 13,
1990 and July 27, 1990, dated as of November 13, 1990 (filed as Exhibit
19 to the September 30, 1990 Form 10-Q and incorporated herein by
reference).
3.5 Amendments to the Bylaws of Registrant by the Board of Directors of
PGI Incorporated by unanimous written consent dated as of March 17,
1995.
4.1 Extension and Forbearance Agreement among PGI Incorporated, Punta
Gorda Developers, Inc., Burnt Store Marina, Inc., and Gulf Coast Credit
Corporation and BancFlorida (formerly Naples Federal Savings and Loan
Association), dated as of March 25, 1987 (filed as Exhibit 4.4 to the
1986 Form 10-K and incorporated herein by reference).
4.2 Seventh Mortgage and Loan Modification Agreement among PGI
Incorporated, Punta Gorda Developers, Inc., Burnt Store Marina, Inc.,
and Gulf Coast Credit Corporation and BancFlorida, dated as of March
25, 1987 (filed as Exhibit 4.5 to the 1986 Form 10-K and incorporated
herein by reference).
- 59 -
<PAGE> 60
<CAPTION>
EXHIBIT INDEX (Continued)
- -------------------------
Sequential
Page Number
<C> <S> <C>
4.3 Eighth Mortgage and Loan Modification Agreement among PGI
Incorporated, Punta Gorda Developers, Inc., Burnt Store Marina, Inc.,
and Gulf Coast Credit Corporation and BancFlorida, dated as of March
25, 1987 (filed as Exhibit 4.6 to the 1986 Form 10-K and incorporated
herein by reference).
4.4 Restated Loan and Security Agreement among PGI Incorporated, Punta
Gorda Developers, Inc., Burnt Store Marina, Inc., and Gulf Coast Credit
Corporation and BancFlorida, as well as Restated Consolidating
Substituted Renewal Note and Future Advance Mortgage Note related
thereto, dated as of March 25, 1987 (filed as Exhibit 4.7 to the 1986
Form 10-K and incorporated herein by reference).
4.5 Forbearance Agreement among PGI Incorporated, Punta Gorda
Developers, Inc., Burnt Store Marina, Inc., and Gulf Coast Credit
Corporation and BancFlorida (Restated Loan Agreement No. 1), dated as
of October 19, 1985 (filed as Exhibit 4.1 to the Registrant's Form 10-Q
Quarterly Report for the quarter ended September 30, 1985 and
incorporated herein by reference).
4.6 Amendment to Restated Loan Agreement No. 1 (Receivables Loan), as
well as Restated Consolidating Substituted Renewal Note relating
thereto, dated as of March 25, 1987 (filed as Exhibit 4.9 to the 1986
Form 10-K and incorporated herein by reference).
4.7 Extension, Forbearance and Modification Agreement between PGI
Incorporated, Punta Gorda Developers, Inc., Burnt Store Marina, Inc.
and Gulf Coast Credit Corporation, and BancFlorida, dated as of May 20,
1988 (filed as Exhibit 4.1 to Registrant's Form 10-Q Quarterly Report
for the quarter ended June 30, 1988 and incorporated herein by
reference).
4.8 Ninth Mortgage and Loan Modification Agreement between PGI
Incorporated, Punta Gorda Developers, Inc., Burnt Store Marina, Inc.
and Gulf Coast Credit Corporation, and BancFlorida, dated as of May 20,
1988 (filed as Exhibit 4.2 to Registrant's Form 10-Q Quarterly Report
for the quarter ended June 30, 1988 and incorporated herein by
reference).
- 60 -
<PAGE> 61
<CAPTION>
EXHIBIT INDEX (Continued)
- -------------------------
Sequential
Page Number
<C> <S> <C>
4.9 Purchase Agreement among Finova Financial Services, PGI
Incorporated and Punta Gorda Developers, Inc., as well as certain
Exhibits and the Mortgage related thereto, dated March 15, 1988 (filed
as Exhibit 1 to Registrant's Form 8-K dated as of March 28, 1988 and
incorporated herein by reference).
4.10 Tenth Mortgage and Loan Modification Agreement between PGI
Incorporated, Punta Gorda Developers, Inc., as well as certain Exhibits
and the Mortgage related thereto, dated May 30, 1989 (filed as Exhibit
1 to Registrant's Form 8-K dated as of June 8, 1989 and incorporated
herein by reference).
4.11 Eleventh Mortgage and Loan Modification among PGI Incorporated
(formerly Punta Gorda Isles, Inc.), Sugarmill Woods, Inc. (formerly
Punta Gorda Developers, Inc.), Burnt Store Marina, Inc. and Gulf Coast
Credit Corporation and BancFlorida (formerly Naples Federal Savings and
Loan Association), dated as of June 1, 1990 (filed as Exhibit 4.2 to
Registrant's Form 10-Q Quarterly Report for the quarter ended June 30,
1990 and incorporated herein by reference).
4.12 Loan Forbearance Agreement among PGI Incorporated (formerly Punta
Gorda Isles, Inc.), Sugarmill Woods, Inc. (formerly Punta Gorda
Developers, Inc.), Burnt Store Marina, Inc. and Gulf Coast Credit
Corporation and BancFlorida (formerly Naples Federal Savings and Loan
Association), dated as of October 17, 1991 (filed as Exhibit 4.12 to
Registrants Form 10-K dated March 30, 1994 and incorporated herein by
reference).
4.13 Twelfth mortgage and loan modification among PGI Incorporated,
Sugarmill Woods, Inc., Burnt Store Marina, Inc. and Gulf Coast Credit
Corporation and BancFlorida, dated as of July 8, 1992 (filed as Exhibit
4.1 to Registrant's Form 8-K dated as of July 24, 1992, and
incorporated herein by reference).
4.14 Thirteenth mortgage and loan modification agreement among PGI
Incorporated, Sugarmill Woods, Inc., Burnt Store Marina, Inc., Gulf
Coast Credit Corporation and First Union, dated as of May 13, 1994
(filed as Exhibit 4.1 to Registrant's Form 8-K dated May 27, 1994 and
incorporated herein by reference).
- 61 -
<PAGE> 62
<CAPTION>
EXHIBIT INDEX (Continued)
- -------------------------
Sequential
Page Number
<C> <S> <C>
4.15 Forbearance Agreement dated as of October 12, 1995 by First Union
National Bank of Florida, PGI Incorporated, Sugarmill Woods, Inc.,
Burnt Store Marina, Inc., Gulf Coast Credit Corporation, Southern
Woods, Incorporated, Punta Gorda Isles, Inc., Deep Creek Utilities,
Inc., Burnt Store Utilities, Inc. and Sugarmill Woods Sales, Inc.
(filed as Exhibit 4(i) to Registrant's Form 8-K on November 1, 1995 and
incorporated herein by reference).
4.16 Note and Loan Document Purchase Agreement dated as of October 12,
1995 by First Union National Bank of Florida, PGIP L.L.C., PGI
Incorporated, Sugarmill Woods, Inc., Burnt Store Marina, Inc., and Gulf
Coast Credit Corporation (filed as Exhibit 4(ii) to Registrant's Form
8-K on November 1, 1995 and incorporated herein by reference).
9. Inapplicable.
10.1 PGI Incorporated Restated 1981 Incentive Stock Option Plan, as
amended (filed as Exhibit 10.1 to the Original 1987 Form 10-K and
incorporated herein by reference).
10.2 PGI Incorporated 1987 Non-Qualified Stock Option and Stock
Appreciation Rights Plan (filed as Exhibit 10.2 to the Original 1987
Form 10-K and incorporated herein by reference).
10.3 Preferred Stock Purchase Agreement by and between PGI Incorporated
and Love Development and Investment Company, dated as of February 16,
1987 (filed as Exhibit (i) to the Registrant's Form 8-K Current Report
dated February 25, 1987 and incorporated herein by reference).
10.4 Employment Agreement between PGI Incorporated and Paula F.
McQueen, dated as of March 25, 1987 (filed as Exhibit 10.6 to the 1986
Form 10-K and incorporated herein by reference).
10.5 Consulting Agreement between PGI Incorporated and Love Real Estate
Company, dated as of March 25, 1987 (filed as Exhibit 10.7 to the 1986
Form 10-K and incorporated herein by reference).
- 62 -
<PAGE> 63
<CAPTION>
EXHIBIT INDEX (Continued)
- -------------------------
Sequential
Page Number
<C> <S> <C>
10.6 Asset Purchase Agreement, as amended, between PGI Incorporated,
Punta Gorda Developers, Inc., Burnt Store Utilities, Inc., Deep Creek
Utilities, Inc., Twin County Utility Company and Southern States
Utilities, Inc., dated as of August 16, 1988 (filed as Exhibit 28.1 to
the Registrant's Form 10-Q Quarterly Report for the quarter ended
September 30, 1988 and incorporated herein by reference).
10.7 Form of Convertible Debenture Agreement due April 30, 1992 between
PGI Incorporated and Love-1989 Florida Partners, L.P. and Mortgage and
Security Agreement dated July 28, 1989 between Sugarmill Woods, Inc.
and Love-1989 Florida Partners, L.P. (filed as Exhibit 10.9 to the
Registrant's Form 10-K Annual Report for the year ended December 31,
1989 and incorporated herein by reference).
11. Statements re: Computation of Per Share Earnings, filed herein on
pages 63 and 64 of this Annual Report on Form 10-KSB.
12. Inapplicable.
13. Inapplicable. No information in Registrant's Annual Report to
Stockholders for the year ended December 31, 1988 has been incorporated
by reference as part of this Amended Annual Report on Form 10-K.
16. Coopers and Lybrand's letter to the SEC dated February 9, 1995
(filed as Exhibit 16 to the Registrant's Form 8-K dated February 9,
1995 and incorporated herein by reference).
18. Inapplicable.
19. Inapplicable.
21. Subsidiaries of the Registrant, filed herein on page 66 of this
Annual Report on Form 10-KSB.
23. Consent of Independent Accountants, filed herein on page 56 of
this Annual Report on Form 10-KSB.
24. Power of Attorney for Directors filed herein on page 57 of this
Annual Report on Form 10-KSB.
- 63 -
<PAGE> 64
<CAPTION>
EXHIBIT INDEX (Continued)
- -------------------------
Sequential
Page Number
<C> <S> <C>
27. Financial Data Schedule.
28. Inapplicable.
29. Inapplicable.
The Registrant agrees to furnish to the Securities and Exchange Commission
upon request, pursuant to Item 601(b)(4)(iii) of the Regulation S-B, copies
of Registrant and its consolidated subsidiaries.
</TABLE>
- 64 -
<PAGE> 1
ACTIONS BY THE BOARD OF DIRECTORS
OF PGI INCORPORATED BY
UNANIMOUS WRITTEN CONSENT
The undersigned, being all of the directors of PGI
Incorporated (the "Company"), a Florida corporation, pursuant to
the authority of the Company's bylaws and the Florida Business
Corporation Act hereby consent and subscribe in writing, without
a meeting, to the following actions:
WHEREAS, the Company is the sole shareholder of the
following Florida corporations: Sugarmill Woods, Inc., Burnt
Store Marina, Inc., Gulf Coast Credit Corporation, Southern
Woods, Incorporated, Punta Gorda Isles Sales, Inc., Deep Creek
Utilities, Inc., Burnt Store Utilities, Inc., and Sugarmill Woods
Sales, Inc., (individually and collectively, the "Corporations")
NOW THEREFORE, BE IT RESOLVED, that the Bylaws of the
Company and of each of the Corporations are hereby amended such
that the Boards of Directors of the Company and of each of the
Corporations shall be reduced to three (3) members, with one (1)
position to remain vacant, with such directors to be elected
annually by the shareholders.
BE IT FURTHER RESOLVED, that the Bylaws of the Company and
of each of the Corporations are hereby amended such that the
directors of the Company and of each of the Corporations need not
be residents of the State of Florida nor shareholders of the
Corporation for which they are serving as a director in order to
serve in such capacity.
BE IT FURTHER RESOLVED, that any and all signatures of the
current officers of each of the Corporations and the Company,
regardless of whether such officers were duly appointed or not,
and regardless of the capacity pursuant to which such officers
signed, are hereby affirmed, ratified and approved in all
respects and for all purposes with respect to all agreements and
contracts of every kind and nature approved by any such officers
or de facto officers, including, without limitation, those
agreements, documents and contracts specified as the "Loan
Documents" in that certain legal opinion of Peper, Martin,
Jensen, Maichel and Hetlage dated as of November 17, 1995 and
given to First Union National Bank of Florida, a national banking
association, as successor in interest to BancFlorida, a Federal
Savings Bank, formerly known as Naples Federal Savings and Loan
Association in connection with the Loan Documents.
IN WITNESS WHEREOF, the undersigned have executed this
written consent as of the 17th day of November, 1995.
/s/ Laurence A. Schiffer /s/ Andrew S. Love, Jr.
- ---------------------------------- ----------------------------------
Laurence A. Schiffer Andrew S. Love, Jr.
BEING ALL THE DIRECTORS
65
<PAGE> 1
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
FACTS FOR COMPUTATION OF NET LOSS PER SHARE
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
1) Net loss for period $ (2,442,000) $ (1,307,000)
2) Average shares outstanding before assumed exercise of stock options and
conversion of preferred stock and debentures 3,317,555 3,317,555
============ ============
3) Average shares outstanding from assumed exercise of stock options:
Primary - -
============ ============
Fully diluted - -
============ ============
4) Average shares outstanding from assumed conversion of preferred stock 3,760,000 3,760,000
============ ============
5) Average shares outstanding from assumed conversion of debentures 1,341,076 1,341,076
============ ============
6) Cumulative preferred dividends in arrears $ 640,000 $ 640,000
============ ============
7) Interest and amortization charged against income for debentures during period $ 759,000 $ 759,000
============ ============
ADJUSTMENT OF NET LOSS:
- -----------------------
Primary
-------
Net loss for period (Line 1) $ (2,442,000) $ (1,307,000)
Less cumulative preferred dividends in arrears (Line 6) (640,000) (640,000)
------------ ------------
8) Adjusted net loss for primary net loss per share $ (3,082,000) $ (1,947,000)
============ ============
Fully Diluted
-------------
Adjusted net loss for primary net loss per share (Line 8) $ (3,061,000) $ (1,947,000)
Add cumulative preferred dividends in arrears on preferred stock assumed converted
(Line 6) 640,000 640,000
Add interest and amortization charged against income for debentures during period
(Line 7) 759,000 759,000
Tax effect on Line 7 - <FA> - <FA>
------------ ------------
9) Adjusted net loss for fully diluted net loss per share ($1,683,000) $ (548,000)
============ ============
ADJUSTMENT OF AVERAGE SHARES OUTSTANDING
- ----------------------------------------
Primary
- -------
Average shares outstanding (Line 2) 3,317,555 3,317,555
Average shares outstanding (Line 3) - -
------------ ------------
10) Shares assumed outstanding for primary net loss per share 3,317,555 3,317,555
============ ============
Fully Diluted
- -------------
Average shares outstanding (Line 2) 3,317,555 3,317,555
Average shares outstanding from assumed exercise of stock options (Line 3) - -
Average shares outstanding from assumed conversion of preferred stock (Line 4) 3,760,000 3,760,000
Average shares outstanding from assumed conversion of debentures (Line 5) 1,341,076 1,341,076
------------ ------------
11) Shares assumed outstanding for fully diluted net loss per share 8,418,631 8,418,631
============ ============
NET LOSS PER SHARE:
- -------------------
Before Adjustment
- -----------------
(Line 1 + Line 2) $ (.74) $ (.39)
======= =======
Primary
- -------
Net loss
(Line 18 + Line 10) $ (.93) $ (.59)
======= =======
Fully Diluted <FB>
- -------------
Net loss <FB> $ (.93) $ (1.11)
======= ========
<FN>
- -----------------------------
<FA> No tax calculation has been made because of full utilization of all
available tax benefits for financial account purposes.
<FB> Fully diluted net loss per share is the same as primary net loss per
share due to anti-dilutive effect of assumed exercise of stock options
and conversion of preferred stock and debentures to common stock.
</TABLE>
- 66 -
<PAGE> 1
Exhibit 21 Page 1 of 1
- ----------
<TABLE>
PGI INCORPORATED
SUBSIDIARIES
<CAPTION>
State of Incorporation Relationship
---------------------- ------------
<S> <C> <C>
Sugarmill Woods, Inc. Florida Wholly owned <F1>
Sugarmill Woods Management, Inc. Florida Wholly owned <F1>
Deep Creek Utilities, Inc. Florida Wholly owned <F1>
Southern Woods, Incorporated Florida Wholly owned by
Sugarmill Woods, Inc.
Burnt Store Marina, Inc. Florida Wholly owned <F1>
Punta Gorda Isles Sales, Inc. Florida Wholly owned <F1>
Burnt Store Utilities, Inc. Florida Wholly owned <F1>
Gulf Coast Credit Corporation Florida Wholly owned <F1>
Sugarmill Woods Sales, Inc. Florida Wholly owned by
Sugarmill Woods, Inc.
Sugarmill Construction, Inc. Florida Wholly owned by
Sugarmill Woods, Inc.
<FN>
- ---------------------------------------
<F1> Included in the Company's consolidated financial statements.
</TABLE>
- 67 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,165,000
<SECURITIES> 0
<RECEIVABLES> 1,669,000
<ALLOWANCES> (976,000)
<INVENTORY> 9,031,000
<CURRENT-ASSETS> 0<F1>
<PP&E> 405,000
<DEPRECIATION> (324,000)
<TOTAL-ASSETS> 11,736,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 21,648,000
<COMMON> 332,000
0
2,000,000
<OTHER-SE> (21,949,000)
<TOTAL-LIABILITY-AND-EQUITY> 11,736,000
<SALES> 124,000
<TOTAL-REVENUES> 961,000
<CGS> 62,000
<TOTAL-COSTS> 101,000
<OTHER-EXPENSES> 922,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,380,000
<INCOME-PRETAX> (2,442,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,442,000)
<EPS-PRIMARY> (.93)
<EPS-DILUTED> (.93)
<FN>
<F1>Current assets and current liabilities values are zero because of an
unclassified balance sheet.
</TABLE>
