<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
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, 1999
----------------------------------------
( ) 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
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Florida 59-0867335
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(State or other jurisdiction (IRS Employer Ident. No.)
incorporation or organization)
212 S. Central, Suite 100; St. Louis, Missouri 63105
- --------------------------------------------------------------------------------
(Address of principal offices) (Zip Code)
Registrant's Telephone Number, including area code: (314) 512-8650
--------------------------
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
--- ---
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 adjustments 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 pages 5 to 6 of Form 10-KSB.
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock as of March 25, 2000.
Common Stock $.10 par value, 5,317,758 shares outstanding.
The Index to Exhibits is located on pages 40 to 44 of this report.
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<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
FORM 10-KSB - 1999
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
Recent Developments 3 - 5
2 Properties 5
3 Legal Proceedings 5
4 Submission of matters to a Vote of Security Holders 5
II 5 Market for Registrant's Common Equity and Related
Stockholder Matters 5 - 6
6 Management's Discussion and Analysis or Plan of
Operation 6 - 12
7 Report of Independent Certified Public Accountants 13
Financial Statements 14 - 31
8 Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 31
III 9 Directors and Executive Officers of The Registrant 32
10 Executive Compensation 32 - 33
11 Security Ownership of Certain Beneficial Owners and
Management 33
12 Certain Relationships and Related Transactions 34 - 37
IV 13 Exhibits, Financial Statement Schedules and Reports on
Form 8-K 38
Signatures 39
Exhibit Index 40 - 44
</TABLE>
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PART I
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Item 1. Business
- ------- --------
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 executive offices are at 212 S.
Central, Suite 100, St. Louis, Missouri, 63105, and its telephone number
is (314) 512-8650.
The Company was founded in 1958 to engage in the business of
building and selling homes, developing and selling homesites and selling
undeveloped or partially developed tracts of land. Substantially all of
the real estate available for sale by the Company is situated within
Sugarmill Woods in west central Florida.
In 1994 the Company's homesite sales effort came to a close with
an exchange of most of the remaining developed homesites inventory in
exchange for a reduction of debt with its primary lender.
During the fiscal year ended December 31, 1996, 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. On May 13, 1998 the Company sold approximately 4,890 acres
of undeveloped real estate located mainly in Citrus County, Florida.
Its remaining inventory mainly consists of 370 acres located in Hernando
County, Florida. The Company intends to make a decision as to whether
it will pursue the development and sale of the commercial property in
accordance with its historical 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.
As of January 1, 2000 the Company had no employees, all services
provided to the Company are through contract services.
RECENT DEVELOPMENTS
On May 13, 1998, approximately 5,240 acres of undeveloped real
estate located in Citrus County and Hernando County, Florida was sold to
the Board of Trustees of the Internal Improvement Trust Fund of the
State of Florida for a total purchase price of $14,759,335. Sugarmill
Woods, Inc., the Company's subsidiary and owner of 4,290
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<PAGE>
acres of the land sold, received $13,446,835 before closing adjustments for
the sale. Love-PGI Partners, L.P. ("L-PGI"), owner of 350 acres of the
land sold, received the remaining $1,312,500. There was no material
relationship among the Company, Sugarmill Woods, Inc., or any of the
affiliates and the purchaser. See Item 12. "Certain Relationships and
Related Party Transactions" for a discussion on how certain affilates of
the Company were involved in the sale and may have been deemed to
benefit from the sale. The disposition of cash from the sale is set
forth below:
<TABLE>
<CAPTION>
Description Amount
----------- ------
<S> <C> <C>
Gross Sale Proceeds of 5,240 Acres $ 14,759,335
Amount Allocable to L-PGI's 350 Acres (1,312,500)
------------
Gross Proceeds from sale of PGI Property 13,446,835
Expenses of Sale
(435,876)
Real Estate Tax Escrow (557,069)
Accrued Tax Adjustment for 1998 (72,345)
Legal Fees Relating to Property Sold (229,139)
First Mortgage Principal ($7,529,756
Less: $1,000,000 remaining) $6,529,756
First Mortgage Interest 3,832,437 (10,362,193)
----------
Escrow Agreement with PGIP (1,000,000)
Judgment (110,108)
------------
Funds to Sugarmill Woods, Inc. $ 680,105
============
</TABLE>
Prospects for the Remaining Acreage
The remaining acreage of the Company mainly consists of 370 acres
located in Hernando County, Florida.
The Company believes that this 370 acres may in the future prove to
be of greater value than the 4,890 acres sold in May, 1998 because of a
greater ratio of acreage to frontage on the proposed Suncoast Expressway,
and because of the close proximity to the planned interchange of the
Suncoast Expressway with Highway 98. The Company believes that completion
of the highway improvements could reasonably be expected to increase
materially the value of the property. In December 1999, the Hernando
County Commission approved a change in land use of 40 acres of the parcel
from residential to commercial use. The Company fully recognizes, however,
that completion of the Suncoast Expressway, if it occurs, is still more
than a year away, and that any information or projections of enhanced
values are purely speculative.
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Sale of Sugarmill Woods Sales, Inc.
The stock of Sugarmill Woods Sales, Inc., a subsidiary of
Sugarmill Woods, Inc. was sold September 15, 1998 to the president of
Sugarmill Woods Sales, Inc. for a price of $25,000. Assets at the time
of sale included the personal property, escrows and rental contracts of
the entity. A promissory note for $24,000 was taken back by Sugarmill
Woods, Inc. secured by a lien on the stock being purchased and
evidenced by a security agreement. The company realized a gain of
$18,000 on this transaction.
Payoff of Debt Collateralized by Contracts Receivable
On June 1, 1998 the Company paid $103,000 to Finova Capital
Corporation in settlement of note obligations and accomplished the
repurchase of contracts receivable on homesite sales, and release of
$265,000 in restricted cash. The Company realized an extraordinary gain
of $870,000 with this settlement. The Company is pursuing repossession
of lots with delinquent status.
Item 2. Properties
- ------- ----------
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 properties are
encumbered by mortgages under either its primary lender agreement with
PGIP, LLC, or other financing agreements (see Item 6 and Note 9 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 15 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 1999.
PART II
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Item 5. Market for Registrant's Common Equity and Related
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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
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Company consented to the removal of its Common Stock and 6% Convertible
Subordinated Debentures from the AMEX. The Company's Common Stock and
Debentures were delisted because the Company's financial condition no
longer satisfied the AMEX's listing requirements. 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 Quotations 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, 1999 there were
648 holders of record of the Company's Common Stock and approximately
447 debenture holders.
Item 6. Management's Discussion and Analysis or Plan of Operation
- ------- ---------------------------------------------------------
PRELIMINARY NOTE
With the sale of over 90% of the Company's undeveloped land
inventory in 1998, the Company is evaluating whether it will pursue the
development and sale of the remaining property in accordance with its
historical 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, 1999 decreased by
$13,800,000 to $136,000 compared to revenues of $13,926,000 for the year
ended December 31, 1998 as a result of the bulk acreage sale in 1998.
The net loss was $2,249,000 ($.54 per share) for 1999 compared to net
income before the extraordinary item of $2,862,000 ($.42 per share) for
1998. Included in the 1999 and 1998 earnings per share computation is
$640,000 ($.19 per share of Common Stock) of annual cumulative preferred
stock dividends in arrears.
Real Estate Activities
- ----------------------
Sales revenues for real estate operations for the years of 1999
and 1998 were:
<TABLE>
<CAPTION>
1999 1998
---- ----
Sales: ($ in thousands)
<S> <C> <C>
- Homesite Sales 27 37
- Acreage Sales - 13,447
-- ------
27 13,484
== ======
</TABLE>
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Cost of sales for real estate operations for the years of 1999 and
1998 were:
<TABLE>
<CAPTION>
1999 1998
---- ----
Cost of Sales: ($ in thousands)
<S> <C> <C>
- Homesite Sales 3 8
- Acreage Sales - 8,427
-- -----
3 8,435
== =====
</TABLE>
Gross profit margins for real estate operations for the years of
1999 and 1998 were:
<TABLE>
<CAPTION>
1999 % 1998 %
---- ----- ---- -----
Gross Profit Margin: ($ in thousands)
<S> <C> <C> <C> <C>
- Homesite Sales 24 88.9% 29 78.4%
- Acreage Sales - - 5,020 37.3%
-- -----
24 5,049
== =====
</TABLE>
Other Activities
In 1998, the Company's cash accounts were substantially larger due
to funds released with the bulk acreage sale in 1998. Interest income
in 1999 decreased by $11,000 compared to a 1998 increase of $53,000 from
1997.
Other income for the years of 1999 and 1998 was:
<TABLE>
<CAPTION>
1999 1998
---- ----
($ in thousands)
<S> <C> <C>
Commission income - 247
Other income 38 113
-- ---
38 360
== ===
</TABLE>
In 1999, the Company no longer has commission income due to the
sale of its subsidiary, Sugarmill Woods Sales, Inc. on September 15,
1998. Other income decreased by $75,000 in 1999 to $38,000 from
$113,000 in 1998. The 1998 other income included a $18,000 gain on the
sale of Sugarmill Woods Sales, Inc. and $27,000 from changes in
valuation allowances.
Costs and Expenses
Selling expenses decreased by $12,000 during 1999 compared to
1998. The current year decrease is a result of fewer contract sales
being paid off and cost associated with recording deeds over to
customers.
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General and administrative expenses increased by $23,000 in 1999
compared to 1998 due to a $160,000 fee incurred in 1999 to settle on the
release of $372,000 in restricted cash relating to a water quality issue
regarding boat locks. This was offset by a reduction in costs for legal
($71,000), accounting ($36,000) and employee compensation ($28,000).
In an effort to conserve cash and reduce overhead, the Company
consolidated its administrative office functions in St. Louis, Missouri
in June 1994. The Company has contracted out the services to Love Real
Estate Company ("LREC"), an affiliate of Love-PGI Partners, the
Company's Preferred Shareholder (see Note 16), to handle the day-to-day
accounting for a fee.
Interest expense for the two years ended December 31, 1999 and 1998 was:
<TABLE>
<CAPTION>
1999 1998
---- ----
($ in thousands)
<S> <C> <C>
Interest Expense $1,847 $2,149
</TABLE>
Interest expense in 1999 decreased by $302,000 compared to 1998
and decreased by $549,000 in 1998 compared to 1997 as a result of
reduced debt concurrent with the bulk acreage sale in 1998.
Other expenses increased by $44,000 in 1999 compared to 1998. In
1998 other expenses increased by $280,000 compared to 1997. The
fluctuation in other expenses is a result of changes in valuation
allowances.
FINANCIAL CONDITION
Assets totaled $2,400,000 at December 31, 1999 compared to
$3,300,000 at December 31, 1998 reflecting the following changes:
<TABLE>
<CAPTION>
1999 1998 Inc. (Dec.)
---- ---- -----------
($ in thousands)
<S> <C> <C> <C>
Cash and Cash Equivalents $ 28 $ 161 (133)
Restricted Cash 1,441 1,903 (462)
Receivables 43 149 (106)
Land and Improvement 763 889 (126)
Net property and Equipment - 1 ( 1)
Other Assets 166 156 10
------ ------ ----
$2,441 $3,259 (818)
====== ====== ====
</TABLE>
Cash decreased by $133,000 to $28,000 at December 31, 1999
compared to $161,000 at December 31, 1998. Net cash flow used in
operations was $222,000 for the year ended December 31, 1999 compared to
net cash flow provided by operations of $9,754,000 for the year ended
December 31, 1998.
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Cash received from operations during 1999 was $83,000, a
$15,135,000 decreased from cash received during 1998. The majority of
the decrease is attributable to the bulk acreage sale in 1998.
Cash expended for operations decreased by $5,159,000 to $305,000
during 1999 from $5,464,000 in 1998, reflecting decreases in the
following classifications; real estate operations ($426,000), general
and administrative ($448,000), interest payments ($4,023,000) and
decreases in other payments of ($262,000).
The $370,000 provided during 1999 from investing activities
included $381,000 of restricted cash funds released of which $300,000
was used for a principal payment on the primary lender debt.
The $281,000 utilized during 1999 in financing activities included
a $300,000 payment of primary lender debt, and $15,000 proceeds from
borrowings with Love Investment Company. The $8,896,000 utilized during
1998 in financing activities generally represents payments of primary
lender debt, and debt obligations with Love Investment Company and The
Finova Capital Corporation.
In order to satisfy its debt obligations, the Company has been and
intends to continue to:
- actively seek buyers for the remaining portion of the
undeveloped acreage, when appropriate;
- diligently pursue collection of its receivables; and
- determine if potential merger or joint venture candidates
exist.
No assurances can be made that the Company can achieve any of the three
above alternatives.
A comparison of the contract receivable delinquency status at December
31, 1999 and 1998 follows:
<TABLE>
<CAPTION>
1999 % 1998 %
---- ----- ---- -----
($ in thousands)
<S> <C> <C> <C> <C>
Current $ - - $ 13 2.0
31 to 60 days delinquent - - 11 1.7
61 days to 90 days delinquent 4 1.1 - -
Over 90 days $372 98.9 $620 96.3
---- ----- ---- -----
Total delinquents $376 100.0 $631 98.0
---- ----- ---- -----
Total contracts $376 100.0 $644 100.0
==== ===== ==== =====
</TABLE>
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Contracts receivable on homesite sales and related receivables are
fully provided for cancellation at December 31, 1999. The Company has
experienced deterioration in the quality of the contracts receivable
portfolio over the past several years. The Company believes the
deterioration is the result of the adverse publicity regarding community
developers, as well as the difficulty of implementing contract
collection activities for foreign receivables.
Liabilities were $26,800,000 at December 31, 1999 compared to
$25,400,000 at December 31, 1998, reflecting the following changes:
<TABLE>
<CAPTION>
1999 1998 Increase (Decrease)
---- ---- -------------------
($ in thousands)
<S> <C> <C> <C>
Accounts payable 37 26 11
Other liabilities 1,219 1,218 1
Accrued interest 13,095 11,391 1,704
Credit agreements - primary
lender 700 1,000 (300)
Notes payable 1,213 1,198 15
Convertible subordinated
Debentures payable 9,059 9,059 -
Convertible debentures payable 1,500 1,500 -
------ ------ -----
26,823 25,392 1,431
====== ====== =====
</TABLE>
The $1,704,000 increase in accrued interest at December 31, 1999
compared to year-end 1998 reflects changes in the following:
<TABLE>
<CAPTION>
1999 1998 Increase (Decrease)
---- ---- -------------------
($ in thousands)
<S> <C> <C> <C>
Primary lender - 22 (22)
Debentures 11,323 9,715 1,608
Other 1,772 1,654 118
------ ------ -----
13,095 11,391 1,704
====== ====== =====
</TABLE>
The decrease in primary lender accrued interest is due to payment
of interest from restricted cash funds. The accrued interest relating
to debentures increased due to the nonpayment of interest on the
company's debentures (see Notes 10 and 11 to the consolidated financial
statements under Item 7).
The $300,000 decrease in credit agreements with the primary lender
is due to a release of restricted cash funds. The $15,000 increase in
notes payable represents borrowing from Love Investment Company. (See
Note 16 to the consolidated financial statements under Item 7).
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The Company's capital deficiency increased to $24,382,000 at
December 31, 1999 from a $22,133,000 capital deficiency at December 31,
1998, reflecting the 1999 operating loss.
As of the date of this filing, the Company is in default of the
entire principal plus interest on its subordinated debentures payable in
amounts indicated in the following table:
<TABLE>
<CAPTION>
12/31/99
--------
Principal Unpaid
Amount Due Interest
---------- --------
($ in thousands)
<S> <C> <C>
Subordinated debentures due June 1, 1991 1,034 683
Subordinated debentures due May 1, 1992 8,025 5,939
----- -----
9,059 6,622
===== =====
</TABLE>
The Company does not have funds available to make any payments of
either principal or interest on the above debentures. (See Notes 9 and
10 to the consolidated financial statements under Item 7).
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 primary lender indebtedness with PGIP, LLC, 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.
Year 2000 Issues
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The year 2000 issue is determined to have had an immaterial effect
on the Company. As of January 1, 1999, the Company began maintaining
the financial records on different software, which is also used by a
related party. The related party was responsible for testing and
modifying the software for the year 2000 processing.
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New Accounting Standards
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FAS 133, "Accounting for Derivative Instruments and Hedging
Activities," which was issued in June 1998, establishes accounting and
reporting standards for derivative instruments and hedging activities.
Under FAS 133, derivatives are recognized on the balance sheet at fair
value as an asset or liability. Changes in fair value of derivatives
are reported as a component of other comprehensive income or recognized
as earnings through the income statement depending on the nature of the
instrument. FAS 133, as amended, is effective for all quarters of
fiscal years beginning after June 15, 2000 with earlier adoption
permitted. The Corporation has not adopted FAS 133 yet and is currently
evaluating FAS 133's effect on its financial position and results of
operations, but it is not expected to have a material impact.
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Item 7. Financial Statements
- ------- --------------------
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
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, 1999
and 1998, 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 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, 1999 and 1998, 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 10 to
the financial statements, the Company is currently in default of certain
sinking fund and interest payments on its convertible subordinated
debentures. The Company has a significant accumulated deficit, is in
default of its primary debt (Note 9), certain sinking fund and interest
payments on its convertible subordinated debentures (Note 10) and its
convertible debentures (Note 11). 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 Note 10. The
financial statements do not include any adjustments that might result
from the outcome of this uncertainty.
/s/ BDO Seidman, LLP
St. Louis, Missouri
March 17, 2000
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<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
December 31, 1999 and 1998
<CAPTION>
ASSETS LIABILITIES
====== ===========
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <S> <C> <C>
Cash and cash equivalents $ 28,000 $ 161,000 Accounts Payable $ 37,000 $ 26,000
Restricted Cash (Note 3) 1,441,000 1,903,000
Receivables on real estate sales- Other liabilities 1,219,000 1,218,000
net (Note 4) - 97,000 (Note 8)
Other receivables 43,000 52,000 Accrued interest:
Primary lender - 22,000
Land and improvement Debentures 11,323,000 9,715,000
Inventories (Note 5) 763,000 889,000 Other 1,772,000 1,654,000
Property and Equipment - net
(Note 6) - 1,000
Other assets (Note 7) 166,000 156,000
Credit Agreements - (Note 9)
Primary lender 700,000 1,000,000
Notes payable 1,213,000 1,198,000
Subordinated Convertible
Debentures payable
(Note 10) 9,059,000 9,059,000
Convertible debentures
Payable (Note 11) 1,500,000 1,500,000
------------ ------------
26,823,000 25,392,000
------------ ------------
Commitments and contingencies
(Note 15)
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
$8,000,000 and cumulative
dividends)
(Note 13) 2,000,000 2,000,000
Common stock, par value
$.10 per share; authorized
25,000,000 shares; 5,317,758
shares issued and outstanding
(Note 13) 532,000 532,000
Paid-in capital 13,498,000 13,498,000
Accumulated deficit (40,412,000) (38,163,000)
------------ ------------
(24,382,000) (22,133,000)
---------- ---------- ------------ ------------
$2,441,000 $3,259,000 $ 2,441,000 $ 3,259,000
========== ========== ============ ============
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years ended December 31, 1999 and 1998
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Revenues:
Real estate sales (Note 2) $ 27,000 $13,484,000
Interest income 71,000 82,000
Other income (Note 2) 38,000 360,000
----------- -----------
136,000 13,926,000
----------- -----------
Costs and expenses:
Cost of real estate sales (Note 2) 3,000 8,435,000
Selling expenses 8,000 20,000
General and administrative
expenses (Note 16) 476,000 453,000
Interest 1,847,000 2,149,000
Other expenses (Note 2) 51,000 7,000
----------- -----------
2,385,000 11,064,000
----------- -----------
Income (loss) before extraordinary item (2,249,000) 2,862,000
Extraordinary item-gain on debt
extinguishment (Note 4) - 870,000
----------- -----------
Net Income(loss) $(2,249,000) $ 3,732,000
=========== ===========
EARNINGS (LOSS) PER SHARE (Note 18)
Basic Earnings (loss) per share before
extraordinary item $ (.54) $ 0.42
Extraordinary item - 0.16
----------- -----------
Basic Earnings (loss) per share $ (.54) $ 0.58
=========== ===========
Diluted earnings (loss) per share before
extraordinary item $ (.54) $ 0.26
Extraordinary item - 0.10
----------- -----------
Diluted earnings (loss) per share $ (.54) $ 0.36
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
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<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1999 and 1998
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Cash received from operations:
Collections from real estate sales and
receivables on such sales $ 58,000 $14,932,000
Interest on homesite and acreage contracts 4,000 6,000
Collections from amenity and other operations - 259,000
Other interest received 8,000 15,000
Other receipts 13,000 6,000
--------- -----------
83,000 15,218,000
--------- -----------
Cash expended for operations:
Payments to subcontractors and vendors for 12,000 438,000
real estate operations and sale and marketing activities
Payments for amenity and other operations - 235,000
General and administrative costs 293,000 741,000
Interest paid - 4,023,000
Other disbursements - 27,000
--------- -----------
305,000 5,464,000
--------- -----------
Net cash flow provided by (used in)
operating activities (222,000) 9,754,000
--------- -----------
Cash flows from investing activities:
Purchases of inventory and deferred expenditures (11,000) -
Proceeds from sale of property and equipment - 25,000
Proceeds from release of restricted cash 381,000 807,000
Payments to establish restricted cash - (1,532,000)
--------- -----------
Net cash flow provided by (used in) investing activities 370,000 ( 700,000)
--------- -----------
Cash flows from financing activities:
Proceeds from notes receivable 4,000 1,000
Proceeds from borrowings 15,000 -
Principal payments on debt (300,000) (8,896,000)
--------- -----------
Net cash flow (used in) financing activities (281,000) (8,895,000)
--------- -----------
Net increase (decrease) in cash and cash equivalents (133,000) 159,000
Cash and cash equivalents at beginning of year 161,000 2,000
--------- -----------
Cash and cash equivalents at end of year $ 28,000 $ 161,000
========= ===========
Non-cash investing and financing activities:
Earnings capitalized into restricted cash $ 55,000 $ 42,000
--------- -----------
Interest paid from restricted cash $ 142,000 $ 64,000
--------- -----------
See accompanying notes to consolidated financial statements.
</TABLE>
-16-
<PAGE>
<PAGE>
<TABLE>
PGI INCORPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years ended December 31, 1999 and 1998
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Reconciliation of net income (loss) to net cash provided by
operating activities:
Net Income (loss) $(2,249,000) $ 3,732,000
Adjustments to reconcile net income (loss) to net cash
Provided by (used in) operating activities:
Depreciation and amortization - 8,000
Net allowance and valuations related
to real estate sales (160,000) 118,000
(Gain)Loss on sale or disposition of property,
plant & equipment - (16,000)
Earnings capitalized into restricted cash (55,000) (76,000)
Interest released from restricted cash 142,000 64,000
(Increase) decrease in:
Contracts and mortgages receivable 257,000 (59,000)
Other receivables - (24,000)
Land and improvement inventories-net 129,000 8,103,000
Prepaid expenses & deposits (2,000) 609,000
Increase (decrease) in:
Accounts payable 11,000 (259,000)
Accrued interest 1,704,000 (1,937,000)
Other accrued expenses 1,000 (509,000)
----------- -----------
Net cash flow provided by (used in) operating
activities $ (222,000) $ 9,754,000
=========== ===========
See accompanying notes to consolidated financial statements.
</TABLE>
-17-
<PAGE>
<PAGE>
<TABLE>
PGI INCOPORATED AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
Years ended December 31, 1999 and 1998
<CAPTION>
Preferred Stock Common Stock Retained
--------------- ------------ Earnings
Shares Par Value Shares Par Value Paid-In Capital (Deficit)
------ --------- ------ --------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C>
Balances at 1/1/98 2,000,000 $2,000,000 5,317,758 $532,000 $13,498,000 $(41,895,000)
Net Income - - - - - 3,732,000
--------- ---------- --------- -------- ----------- ------------
Balances at 12/31/98 2,000,000 $2,000,000 5,317,758 $532,000 $13,498,000 $(38,163,000)
Net Loss - - - - - (2,249,000)
--------- ---------- --------- -------- ----------- ------------
Balances at 12/31/99 2,000,000 $2,000,000 5,317,758 $532,000 $13,498,000 $(40,412,000)
========= ========== ========= ======== =========== ============
See accompanying notes to consolidated financial statements.
</TABLE>
-18-
<PAGE>
<PAGE>
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 inter-company 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.
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 collectibility 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 Standard No. 66 "Accounting for Sales
of Real Estate".
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.
Provisions 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 canceled receivables are
charged to the allowance for cancellations.
-19-
<PAGE>
<PAGE>
Land and Improvement Inventories
- --------------------------------
Land held for sale to customers and land held for bulk sale are
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 footage, future improvements 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 and other expense.
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.
New Accounting Standards
- ------------------------
FAS 133, "Accounting for Derivative Instruments and Hedging
Activities," which was issued in June 1998, establishes accounting and
reporting standards for derivative instruments and hedging activities.
Under FAS 133, derivatives are recognized on the balance sheet at fair
value as an asset or liability. Changes in the fair value of
derivatives are reported as a component of other comprehensive income or
recognized as earnings through the income statement depending on the
nature of the instrument. FAS 133, as amended, is effective for all
quarters of fiscal years beginning after June 15, 2000 with earlier
adoption permitted. The Corporation has not adopted FAS 133 yet and is
currently evaluating FAS 133's effect on its financial position and
results of operations, but it is not expected to have a material impact.
-20-
<PAGE>
<PAGE>
Rounding
- --------
The dollar amounts in the accompanying financial statements and
notes to the financial statements have been rounded to the nearest
thousand.
2. Real Estate Sales, Other Income and Other Expense:
--------------------------------------------------
Real estate sales and cost of sales consisted of:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Sales:
Homesites sales $27,000 $ 37,000
Bulk acreage sale - 13,447,000
------- -----------
$27,000 $13,484,000
======= ===========
Cost of Sales:
Homesite sales $ 3,000 $ 8,000
Bulk acreage sale - 8,427,000
------- -----------
$ 3,000 $ 8,435,000
======= ===========
</TABLE>
On May 13, 1998, a bulk acreage sale comprising approximately
4,890 acres of undeveloped real property was consummated. After this
sale, the Company has approximately 370 acres of undeveloped real
property remaining.
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Other income consisted of:
Commission income $ - $ 247,000
Other income 38,000 113,000
------- ---------
$38,000 $ 360,000
======= =========
Other expenses consisted of:
Reduction of previously
accrued property taxes $ - (248,000)
Other expenses 51,000 255,000
------- ---------
$51,000 $ 7,000
======= =========
</TABLE>
-21-
<PAGE>
<PAGE>
3. Restricted Cash:
----------------
Restricted cash includes restricted proceeds held by the primary
lender as collateral for debt repayment, an escrow for payment of
disputed real estate taxes, funds pledged to Florida agencies related to
water quality standards, and escrowed receipts related to sold contracts
receivable.
Restricted cash of $372,000 was released subsequent to year end,
on February 24, 2000. The restricted fund had been established with the
deposit of $250,000 in escrow for twenty years pursuant to a Permit
Agreement entered into June 19, 1973. The agreement provided for state
certification of water quality standards in conjunction with
construction of navigable waterways in Charlotte County, Florida.
4. Receivables on Real Estate Sales:
---------------------------------
Net receivables on real estate consisted of:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Contracts receivable on homesite sales $ 376,000 $ 644,000
Other - 84,000
--------- ---------
$ 376,000 728,000
Less: Allowance for cancellations (376,000) (631,000)
--------- ---------
$ - $ 97,000
========= =========
</TABLE>
The Company generally considers receivables on real estate sales
delinquent if the scheduled installment payment is over 30 days past
due. At December 31, 1999 and 1998 delinquent receivables approximated
$376,000 and $631,000 respectively.
Contracts receivable on homesite sales and related receivables are
fully provided for cancellation at December 31, 1999. The Company has
been actively pursuing collection on the delinquent receivables. An
assessment is made for each contract receivable as to the economic
benefit of reacquisition of the lot considering the cost of foreclosure,
delinquent taxes and association fees due, and estimated current sale
value of the lot. For those with benefit, foreclosure action is begun
in the absence of payment or receipt of a quit claim deed of the
property back to the Company.
At December 31, 1999, 33% of the Company's receivables from real
estate sales represented customers who maintain foreign status, and 5%
represented accounts which are IRA's.
-22-
<PAGE>
<PAGE>
Effective June 1, 1998 the Company purchased contracts receivable
back from Finova Capital Corporation and settled on related debt
obligations with Finova. The Company had originally sold the 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 had been treated as a financing
transaction, since the Company had a potential obligation to
repurchase the contracts receivable on homesite sales under
conditions other than the recourse provision of the sales agreement.
The repurchase resulted in an extraordinary gain of $870,000 in
settlement of debt and elimination of an unamortized valuation discount
of $39,000.
5. Land and Improvements:
----------------------
Land and improvement inventories consisted of:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Unimproved land $613,000 $613,000
Fully improved land 150,000 276,000
-------- --------
$763,000 $889,000
======== ========
</TABLE>
6. Property and Equipment:
-----------------------
Property and equipment consisted of:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Furniture, fixtures and other $ 31,000 $ 93,000
equipment
Less accumulated depreciation (31,000) (92,000)
-------- --------
$ - $ 1,000
======== ========
Depreciation: $ - $ 8,000
======== ========
</TABLE>
7. Other Assets:
-------------
Other assets consisted of:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deposit with Trustee of 6 1/2%
debentures $144,000 $138,000
Other 22,000 18,000
-------- --------
$166,000 $156,000
======== ========
</TABLE>
-23-
<PAGE>
<PAGE>
8. Other Liabilities:
------------------
Other liabilities consisted of:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Accrued property taxes
- current $ 35,000 $ 32,000
- delinquent 668,000 675,000
Other accrued expenses 495,000 328,000
Deposits, advances and - 174,000
escrows
Estimated recourse liability 21,000 9,000
for receivables sold
---------- ----------
$1,219,000 $1,218,000
========== ==========
</TABLE>
9. Credit Agreements - Primary Lender and Notes Payable:
-----------------------------------------------------
Credit agreements with the Company's primary lender and notes
payable consisted of the following:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Credit agreements - primary
lender (Balance is past due,
bearing interest at prime plus
5.0%): $ 700,000 $1,000,000
Notes payable -
$1,176,000 bearing interest at
prime rate plus 2%, the
remainder bearing interest at
12%; all past due 1,213,000 1,198,000
---------- ----------
$1,913,000 $2,198,000
========== ==========
</TABLE>
The prime rate at December 31, 1999 was 8.50%.
At December 31, 1999 assets collateralizing the Company's credit
agreements with its primary lender and notes payable totaled $1,639,000,
of which $506,000 represented escrow held by the primary lender,
$376,000 represented gross receivables on real estate sales, $43,000
represented other receivables, and $714,000 represented land and
improvement inventories.
The overall weighted average interest rate for the Company's
credit agreements with its primary lender and all remaining notes
and mortgages was approximately 11.2% as of December 31, 1999 and
13.1% as of December 31, 1998.
-24-
<PAGE>
<PAGE>
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.
All of the primary lender debt and notes payable are past due.
10. Subordinated Convertible Debentures Payable:
--------------------------------------------
Subordinated debentures payable consisted of:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
6 1/2%, due June 1991 $1,034,000 $1,034,000
6%, due May 1992 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 into common stock;
however, this conversion feature is no longer in effect.
The Company is in default of certain sinking fund and interest
payments on both subordinated debentures totaling $9,059,000 in
principal plus accrued and unpaid interest of $6,622,000 at December 31,
1999 and $5,811,000 as of December 31, 1998.
The debentures are not collateralized and are not subordinated to
each other, but are subordinated to senior indebtedness ($3,413,000 at
December 31, 1999). 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 the remaining portion of the undeveloped
acreage, when appropriate;
- - diligently pursue collection of its receivables; 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.
-25-
<PAGE>
<PAGE>
11. 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 maturity date on all the remaining debentures was
extended to July 8, 1997 so that the debentures are in default. The
past due debentures 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. At maturity the Convertible Debentures purchased on July 24,
1989, were convertible into 868,788 common shares and those purchased on
September 29, 1989, were convertible into 1,726,568 common shares, or a
total of 2,595,356 shares of common stock at an initial conversion price
of $1.72 per share. The conversion price may be adjusted upon the
occurrence of certain events.
The debentures held by Love-1989 Florida Partners, L.P., which
total $796,950 in principal amount are secured by a second mortgage
behind PGIP, LLC in the approximate 370 acres retained by the Company
and a security interest behind that held by PGIP, LLC in the restricted
proceeds escrow.
Accrued interest was $4,701,000 and $3,904,000 at December 31,
1999 and 1998 respectively.
12. Income Taxes:
Reconciliation of the statutory federal income tax rates, 34% for
the years ended December 31, 1999 and 1998, to the Company's effective
income tax rates follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
($ in thousands)
Amount of tax Percent of Amount of tax Percent of
------------- Pre-tax Loss ------------- Pre-tax Loss
------------ ------------
<S> <C> <C> <C> <C>
Expected tax (credit) $(765) (34.0%) $ 1,269 34.0%
State income taxes, net of (90) (4.0%) 149 4.0%
federal tax benefits
Current year unused book 855 38.0% (1,418) (38.0%)
----- ------ ------- ------
operating loss $ - - $ - -
===== ====== ======= ======
</TABLE>
-26-
<PAGE>
<PAGE>
At December 31, 1999, the Company had an operating loss carry
forward of approximately $36,000,000 which will expire at various dates
through 2012. In addition, the Company had unused investment tax
credits of approximately $215,000 which will expire at varying dates
through 2004.
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Deferred tax asset:
Net operating loss carryover $ 13,600,000 $ 12,580,000
Adjustments to reduce land to net
realizable value 12,000 12,000
Expenses capitalized under IRC 263(a) 56,000 56,000
ITC carry forward 215,000 215,000
Other - -
Valuation allowance (13,711,000) (12,691,000)
------------ ------------
$ 172,000 $ 172,000
Deferred tax liability:
Basis difference of land and
improvement inventories $ 172,000 $ 172,000
------------ ------------
Net deferred tax asset $ 0 $ 0
============ ============
</TABLE>
13. 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 Love-PGI
Partners, L.P. ("L-PGI") 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, 1999 cumulative preferred
dividends in arrears totaled $2,996,000 ($640,000 of which related to
the year ended December 31, 1999). On May 15, 1997 preferred dividends
accrued through April 25, 1995 totaling $4,260,433 were paid in the form
of 2,000,203 shares of common stock.
-27-
<PAGE>
<PAGE>
As of December 31, 1999, the preferred stock is 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, 1999 the Company had reserved 4,684,138 common
shares for the conversion of debentures.
14. Quarterly Results:
------------------
In the fourth quarter of 1999 the contracts receivable and
allowance for contracts receivable were adjusted to consider delinquent
accounts for which quit claim deeds had been filed and property was
effectively reacquired. In addition, doubtful accounts on other
receivables relating to real estate sales were fully provided for with
an adjustment of $48,000 reflected in other expense. Utility inventory
relating to sold lots, and respective deferred utility charges were
adjusted as well as prepaid utility balances to recognize $14,000 in
other income.
In addition, in the fourth quarter of 1999, the $160,000 fee due
per the terms of the settlement agreement for the restricted escrow
related to the water quality issue in Charlotte County, Florida was
recognized in general and administrative expenses.
15. Commitments and Contingencies:
------------------------------
The Company is a party to various legal proceedings incidental to
the normal operation of its business.
One instance of litigation involves Sugarmill Woods, Inc. and
Citrus County Tax Collector. In 1994, the Citrus 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 Tax Appraiser again denied
agricultural exemption status for the undeveloped Sugarmill Woods
property, but was overruled by the Value Adjustment Board. As a result,
the Tax Appraiser sued Sugarmill Woods, and was again successful in
denying the agricultural exemption for the property. The Company won on
appeal, but the Tax Assessor appealed to the Supreme Court of Florida to
reinstate the exemption. On April 1,1999, the Supreme Court of Florida
issued their opinion in favor of Sugarmill Woods, Inc. A motion has
been filed to recover permissible expenses incurred in litigating the
case. On November 9, 1999 the Circuit Court of Citrus County adjudged
the agricultural classification applicable to tax years 1994, 1995 and
1996. Tax year 1997 remains in dispute on a matter of timely filing of
petition for exemption. There is a restricted escrow of $557,000 for
payment of the taxes.
-28-
<PAGE>
<PAGE>
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 Note 4, totaled approximately $42,000 and $48,000 at
December 31, 1999 and 1998 respectively. Based on its collateral
experience with such receivables, the Company maintained an allowance at
December 31, 1999 and 1998 classified in other liabilities, of
approximately $21,000 and $9,000 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, 1999, sold contracts receivable
greater than 90 days past due totaled $21,000. The related accrued
interest is considered immaterial.
16. Related Party Transactions:
---------------------------
As of December 31, 1999 the Company was in default of its primary
credit agreements with PGIP, LLC ("PGIP"). In September 1999, the
Company made a payment of $300,000 on primary lender debt utilizing
restricted cash funds. In May 1998, concurrent with the bulk acreage
sale the Company paid a portion of the principal and all of the past due
accrued interest due PGIP (See Note 2).
PGIP is owned and 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 the executive officers and
directors of the Company and the other Borrowers and the Guarantors.
In 1994, the Company moved its administration and accounting
offices to Love Real Estate Company ("LREC"). LREC, which is an
affiliate of L-PGI, the Company's preferred shareholder, is paid a
monthly fee for the following:
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.
-29-
<PAGE>
<PAGE>
In addition, the Company receives office space, telephone service
and computer service from LREC. The fee was reduced to $3,000 per month
from $7,000 per month effective October 1, 1998. The fee reduction
coincided with the sale of Sugarmill Woods Sales, Inc.
Effective March 25, 1987, the Company entered into the Management
Agreement with LREC. As a consultant to the Company and in addition to
the above services, LREC provides other services including, but not
limited to, strategic planning, marketing and financing as requested by
the Company. In consideration for these consulting services, the
Company pays LREC a quarterly consulting fee of one-tenth of one per
cent of the book value of the Company's assets, plus reasonable out-of-
pocket expenses. As of December 31, 1999, the book value of the
Company's assets was approximately $2,400,000. Consulting fees totaling
$12,000 and $29,000 were accrued during 1999 and 1998 respectively. As
of December 31, 1999, a total of $308,000 of unpaid fees had accrued
under the Management Agreement.
An affiliate of L-PGI, the Company's preferred shareholder, Love
Investment Company made uncollateralized loans to the Company, with
balances of $15,000 and $585,000 in 1999 and 1998. The 1999 loan
remains outstanding as of December 31, 1999. The 1998 loan balance plus
accrued interest was paid off June 19, 1998. Interest charged on these
loans was $1,000 and $32,000 for 1999 and 1998, respectively.
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, 1999 had an outstanding balance, including accrued interest
of $411,000. Interest accrued on this loan was $18,000 for 1999 and
1998.
17. 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.
Debt:
It was not practicable to estimate the fair value of the Company's
debt with its primary lender, its notes payable and its convertible
debentures because these debts are in default causing no basis for
estimating value by reference to quoted market prices or current rates
offered to the Company for debt of the same remaining maturities.
-30-
<PAGE>
<PAGE>
Accounts Payable:
The carrying amount approximates fair value because of the short-
term maturity of those debts. The estimated fair values of the
Company's financial instruments are as follows:
<TABLE>
<CAPTION>
Carrying Fair
1999 Amount Value
---- ------ -----
<S> <C> <C>
Cash and short-term investments $ 1,469,000 $1,469,000
Accounts payable 37,000 37,000
Debt 12,472,000 -
</TABLE>
18. Income (Loss) Per Share:
------------------------
The following is a summary of the calculations used in computing
basic and diluted income (loss) per share:
<TABLE>
<CAPTION>
1999 1998
---- ----
<S> <C> <C>
Numerator:
Net Income (Loss) $(2,249,000) $3,732,000
Preferred Dividends (640,000) (640,000)
----------- ----------
Income (Loss) Available to
Common Shareholders $(2,889,000) $3,092,000
=========== ==========
Denominator:
BASIC
Weighted average amount of shares
outstanding 5,317,758 5,317,758
DILUTED
Weighted average amount of shares
outstanding 5,317,758 5,317,758
Dilutive effect of assumed conversion
of Preferred Stock - 3,320,000
----------- ----------
Dilutive common shares 5,317,758 8,637,758
=========== ==========
Earnings (loss) per share
Basic (.54) 0.58
Dilutive (.54) 0.36
</TABLE>
Item 8. Changes in and Disagreements with Accountants on Accounting
- ------- -----------------------------------------------------------
and Financial Disclosure
------------------------
Not Applicable.
-31-
<PAGE>
<PAGE>
PART III
--------
Item 9. Directors and Executive Officers of the Registrant;
- ------- ---------------------------------------------------
Compliance with Section 16(a) of the Exchange Act
-------------------------------------------------
The following information, regarding executive officers and
directors of the Company, is as of March 25, 2000.
<TABLE>
<CAPTION>
Position with Company and Business Experience
Name and Age During the Last Five Years
------------ ---------------------------------------------
<C> <S>
Laurence A. Schiffer Director of the Company since April 1987; President and
(age 60) Chief Executive Officer of the Company since February 1994;
Vice Chairman of the Board since May 1987; President and
Chief Executive Officer of Love Real Estate Company and Love
Investment Company since 1973; Chairman of Heartland Bank
and President of LSHC, the parent company of Heartland Bank
since December 1985; Manager of PGIP since 1995; member of
the Real Estate Board of Metropolitan St. Louis and the
National Association of Real Estate Boards.
Andrew S. Love Jr. Chairman of the Company's Board of Directors since May
(age 56) 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 Bank and Chairman of LSHC, the parent company of
Heartland Bank since December 1985; Manager of PGIP since
1995.
</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 Company's Chief Executive Officer is Mr. Laurence A. Schiffer.
Because of the Company's impaired financial condition, it does not
compensate Mr. Schiffer or Mr. Love, the Company's only other executive
officer, for the services they perform for the Company in that capacity.
Management services are provided to the Company by Love Real Estate
Company ("LREC") pursuant to that certain Management Consulting
Agreement by and between the Company and LREC dated March 25, 1987
(the "Management Agreement"). Mr. Schiffer is an employee of, and
receives an annual salary from LREC. Mr. Love receives only a nominal
salary from LREC. Neither the
-32-
<PAGE>
<PAGE>
Company nor LREC maintains records, which would allow either of them to
attribute any portion of the remuneration Mr. Schiffer receives from
LREC to the management services he performs for the Company. See Item
12. "Certain Relationships and Related Party Transactions" for
additional information about the Management Agreement.
Neither Mr. Schiffer nor Mr. Love received fees from any source
directly attributable to their services as directors of the Company
during 1999.
Item 11. Security Ownership of Certain Beneficial Owners and
- -------- ---------------------------------------------------
Management
----------
The table below provides certain information as of March 25, 2000
regarding the beneficial ownership of the Common Stock and the Preferred
Stock by each person known by the Company to be the beneficial owner of
more than five percent of either the Common Stock or the Preferred
Stock, each director of the Company (which persons are also the
Company's only executive officers), and by virtue of the foregoing, the
directors and executive officers of the Company as a group.
<TABLE>
<CAPTION>
Percent of Total
---------------- Percent of
Common Preferred Common Preferred Total Voting
Name Stock Stock Stock<F1> Stock Power<F1>
---- ----- ----- --------- ----- ---------
<S> <C> <C> <C> <C> <C>
Estate of Harold Vernon 998,777<F2><F3> - 18.8% - 13.7%
Alfred M. Johns 437,414<F4> 125,000<F4> 8.2% 6.3% 7.7%
Love-PGI Partners, L.P. 2,260,706<F5> 1,875,000<F5> 42.5% 93.8% 56.5%
Andrew S. Love, Jr. 385,516<F6> 1,875,000<F6> 42.5% 93.8% 56.5%
Laurence A. Schiffer 385,516<F7> 1,875,000<F7> 42.5% 93.8% 56.5%
All executive officers and directors
as a group (2 persons) 385,516<F8> 1,875,000<F8> 42.5% 93.8% 56.5%
<FN>
<F1> The above table does not include 2,595,356 shares that may be
received upon conversion of the Company's Convertible Secured
Debentures.
<F2> The shares of Common Stock owned by Mr. Vernon 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 that the FDIC has
the right, pursuant to a pledge agreement, to vote the shares at
any annual or special meeting of shareholders.
<F3> Information obtained from filings made with the Securities and
Exchange Commission.
<F4> Sole voting and investment power over 302,401 shares of Common
Stock; shared voting and investment power over 10,100 shares of
Common Stock included in the table which are owned by Mr. John's
wife; sole voting and investment power over the 125,000 shares of
Preferred Stock.
<F5> The controlling general partner of L-PGI is Love Investment
Company, a Missouri Corporation owned by Mr. Love, Love family
members and trusts, the Estate of Martha Love Symington and Mr.
Schiffer. Messrs. Love and Schiffer serve as the executive
officers and directors of Love Investment Company.
<F6> These shares are the same shares owned by L-PGI. Mr. Love is an
indirect owner of L-PGI. See Footnote 5 above and Item 12.
"Certain Relationships and Related Transactions" for more
information.
<F7> These shares are the same shares owned by L-PGI. Mr. Schiffer is
an indirect owner of L-PGI. See Footnote 5 above and Item 12.
"Certain Relationships and Related Transactions" for more
information.
<F8> These shares are the same shares reflected in Footnotes 5, 6 and
7. See Footnote 5 above and Item 12. "Certain Relationships and
Related Transactions" for more information.
</TABLE>
-33-
<PAGE>
<PAGE>
Item 12. Certain Relationships and Related Transactions
- -------- ----------------------------------------------
In order to conserve cash and permit management to concentrate on
achieving a sale of all or a portion of its real estate, in 1994 the
Company moved its administration and accounting offices to the offices
of Love Real Estate Company ("LREC") in St. Louis, Missouri. LREC, a
Missouri Corporation, is an affiliate of L-PGI, and is located at 212
South Central Avenue, Suite 100, St. Louis, Missouri 63105. A fee of
$7,000 per month was paid to LREC for the first nine months of 1998, and
reduced to $3,000 per month October 1, 1998. The fee reduction
coincided with the sale of Sugarmill Woods Sales, Inc. The following is
a list of services provided:
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;
8. Handle day-to-day accounting requirements; and
9. Provide telephone and computer service.
Although an amount is paid to LREC as reimbursement for expenses
and as a fee for providing management services to the Company, neither
the Company nor LREC maintain records which would allow them to
attribute to any portion of the aforementioned monthly fee to
reimbursement of particular expenses or to payment for the management
services performed for the Company by individual employees of LREC,
including Messrs. Love and Schiffer.
Effective as of March 25, 1987, the Company entered into the
Management Agreement with LREC. As a consultant to the Company and in
addition to the above services, LREC provides other services including,
but not limited to, strategic planning, marketing and financing as
requested by the Company. In consideration for these consulting
services, the Company pays LREC a quarterly consulting fee of
one-tenth of one per cent of the book value of the Company's
assets, plus reasonable out-of-pocket expenses. As of December 31,
1999, the book value of the Company's assets was approximately $2.4
million. Consulting fees totaling $12,000 were accrued during 1999
and the Company made payments of $22,000 in consulting fees in 1998.
As of December 31, 1999, a total of $308,000 of unpaid fees had
accrued under the Management Agreement. In July 1992 accrued
management fees were reduced by $1,042,000 as partial consideration
for the conveyance by the Company of 350 acres of real estate to L-PGI,
which conveyance is described in more detail in the paragraph below
describing the Debentures. These 350 acres comprise a portion of the
Property sold in May 1998.
-34-
<PAGE>
<PAGE>
The Management 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 LREC or in any LREC
affiliated entity. Currently all directors have a financial interested
in LREC or one of its affiliates.
Mr. Love receives a nominal salary from LREC. Although Mr.
Schiffer receives a salary from LREC, such salary compensates him for
his services to LREC, which provides consulting services for numerous
other entities affiliated with the Company, and none of the amount
earned by LREC under the Management Agreement is intended to be
allocated or attributable to any officer of employee, including Mr.
Schiffer, of LREC. No part of Mr. Schiffer's annual salary from LREC is
directly attributable to the management services he performs for the
Company as an employee of LREC pursuant to the Management Agreement.
An affiliate of L-PGI, Love Investment Company, made
uncollateralized loans to the Company, with balances of $15,000 and
$585,000 in 1999 and 1998. The 1999 loan remains outstanding as of
December 31, 1999. The 1998 loan balance plus interest was paid off
June 19, 1998. Interest charged on these loans was $1,000 and $32,000
for 1999 and 1998 respectively.
In 1989, the Company sold an aggregate $2,282,451 principal amount
of the Convertible Debentures in a private placement to Love-1989
Florida Partners, L.P.("Love-1989") The general partner of Love-1989 is
Love Investment Company, which is owned by Mr. Love, Love family members
and trusts, the Estate of Martha Love Symington and Mr. Schiffer. The
above purchase by Love-1989 of the Debentures was funded in part with a
loan from L-PGI. Love-1989 has since repaid the debt to L-PGI in full,
in part by transferring a portion of the Debentures held by Love-1989 to
L-PGI. In July 1992, as partial consideration for the Company's
conveyance of 350 acres of property to L-PGI, the Company retired
$782,000 in principal amount of the Debentures held by L-PGI together
with $389,000 in accrued interest. The maturity date on all of the
remaining Debentures was extended to July 8, 1997 so that the Debentures
are in default.
The Debentures were in part collateralized by a second mortgage in
favor of Love-1989 on 650 acres of the Property owned by the Company,
which was sold in May 1998. The 350 acres transferred to L-PGI as
described above were also included in the Property sold. Messrs. Love
and Schiffer have caused the Company to grant a second mortgage on the
Retained Acreage to Love-1989 and in their capacities as control persons
of Love-1989, they caused Love-1989 to release its second mortgage on
the 650 acres of the Property sold and they caused the Company to grant
a security interest to Love-1989 behind that held by PGIP in the escrow
of the Restricted Proceeds which is under the control of Messrs. Love
and Schiffer since they and a company they control are the managers of
PGIP.
-35-
<PAGE>
<PAGE>
As of December 31, 1999, Love-1989 held $796,950 in principal
amount of the Debentures with respect to which there was at that date
accrued and unpaid interest in the amount of $2,522,000. In 1990,
$703,050 principal amount of the Debentures was transferred by Love-1989
to one of its (now former) limited partners. That former limited
partner continues to hold such Debentures and as of December 31, 1999
there was accrued and unpaid interest with respect thereto in the amount
of $2,179,000.
In 1985, a corporation owned by Alfred M. Johns, the former
Chairman of the Company, and his family made an uncollateralized loan to
the Company, which at December 31, 1999 had an outstanding balance,
excluding accrued interest, of $176,000. Besides being a direct owner
of Common and Preferred Stock, Mr. Johns has no other direct or indirect
affiliations with the Company.
For the past several years, First Union, the Company's former
primary bank lender, had been threatening to foreclose on substantially
all of the Company's real estate. This would have forced a liquidation
of the Company. To prevent foreclosure, Messrs. Love and Schiffer, who
control a large portion of the Voting Capital Stock through their
affiliation with L-PGI and who are the Company's only directors and
executive offices, formed PGIP in August 1995 to purchase the Company's
First Mortgage Indebtedness and to accept the assignment from First
Union of the first mortgage securing repayment of the First Mortgage
Indebtedness.
On March 28, 1996, First Union assigned to PGIP all of its right,
title and interest in and to the loan documents (i) evidencing First
Union' s credit agreements with the Company and Company's subsidiaries,
Sugarmill Woods, Burnt Store Marina, Inc., and Gulf Coast Credit
Corporation, and (ii) securing such indebtedness with substantially all
of the Company's real estate (the "Loan Documents"). At the time of the
assignment, the First Mortgage Indebtedness was approximately $9,007,000
in principal and accrued interest.
The largest investor in PGIP is Love Savings Holding Company
("LSHC") which holds an approximate 75% interest in, and is a manager of
PGIP. Messrs. Love and Schiffer own approximately 52% of all the issued
and outstanding voting stock of LSHC and serve as the directors and
officers of LSHC. Messrs. Love and Schiffer are the managers of PGIP.
The holders of the remaining limited liability company interests do not
have any affiliation with PGI, LSHC, L-PGI or Love-1989 Florida
Partners, L.P.
As the purchaser of the loan documents from First Union, PGIP
obtained a first mortgage (the "First Mortgage") on the PGI Property.
PGIP accepted assignment of the credit agreements, which were in default
and with respect to which maturity of the First Mortgage Indebtedness
secured by the first mortgage had been accelerated, and advised the
Company that so long as the Company were to market and sell its
remaining undeveloped land with satisfactory efforts and results,
including payments to PGIP out of the proceeds received from the sale of
such undeveloped land, PGIP would not proceed
-36-
<PAGE>
<PAGE>
with enforced collection of the principal and interest comprising the
First Mortgage Indebtedness.
During 1998, PGIP further advanced $186,240 to the company to pay
fees incurred to continue professional work on the bulk sale of property
under the aforementioned Option Agreement, as Amended. On May 13, 1998
upon closing of the bulk acreage sale, the Company paid PGIP $10,362,193
in principal and accrued interest which left $1,000,000 in principal
outstanding.
After payment of its debts and liabilities with the closing of the
bulk acreage sale in May of 1998, PGIP made cash distributions to its
members in accordance with its Operating Agreement. LSHC, which holds
approximately 75% of the PGIP limited liability company interests,
received approximately $2,505,097 in excess of its investment in PGIP.
Because Messrs. Love and Schiffer, the Company's only directors and
executive officers, together own 52% of LSHC, they could be deemed to
have "profited" by an aggregate of approximately $1,302,650. The amount
of profit to LSHC and Messrs. Love and Schiffer is based on the use of
proceeds set forth above. It could increase upon payment of the
remaining $1,000,000 mortgage amount and interest and by an additional
amount of up to ten percent of PGIP's profit over a specified minimum
rate of return based upon the incentive arrangements that PGIP has with
its members.
At closing, the Company and PGIP executed an escrow agreement (the
"Escrow Agreement"). The Escrow Agreement provides that $1,000,000 of
the PGI Purchase Price would not be used to repay the First Mortgage
Indebtedness, so that $1,000,000 (the "Remaining Indebtedness") of the
First Mortgage Indebtedness would remain in place. The $1,000,000 was
placed in escrow with PGIP as the escrow agent. Pursuant to the Escrow
Agreement, the escrowed funds are to be paid out (i) as requested by PGI
and agreed to by PGIP, or (ii) as deemed necessary and appropriate by
PGIP, in either case, to protect PGIP's interest in the Retained Acreage
(as hereinafter defined), including PGIP's right to receive principal
and interest under the First Mortgage securing the Remaining
Indebtedness, or (iii) to PGIP to pay any other obligations owed to PGIP
by the Company. The real estate owned by the Company, which was not
sold to the Purchaser (approximately 370 acres) (the "Retained Acreage")
remains subject to the First Mortgage.
Since closing, funds have been disbursed from the $1,000,000
escrow to pay interest on the First Mortgage Indebtedness, to make a
$300,000 principal payment on the Mortgage in September, 1999, and to
release $50,000 to the Company to pay operating expenses in October,
1999.
The Company believes that the foregoing transactions were on terms
comparable to those, which would have been obtained from unaffiliated
persons.
-37-
<PAGE>
<PAGE>
Item 13. Exhibits, Financial Statement Schedules & Reports on Form 8-K
- -------- -------------------------------------------------------------
10-KSB Form
(a) 1. Financial Statements Page Number
Report of Independent Accountants 13
--
Consolidated Statements of Financial Position
December 31, 1999 and 1998 14
--
Consolidated Statements of Operations Years Ended
December 31, 1999 and 1998 15
--
Consolidated Statements of Cash Flows Years Ended
December 31, 1999 and 1998 16-17
-----
Consolidated Statements of Stockholders' Deficiency
Years Ended December 31, 1999 and 1998 18
--
Notes to Consolidated Financial Statements 19-31
-----
(a) 2. Exhibits
Reference is made to the Exhibit Index contained on pages 40 to 44
herein for a list of exhibits filed under this Item.
(b) Reports on Form 8-K.
None were filed in the fourth quarter of 1999.
(c) See the Exhibit Index contained on pages 40 to 44 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 and 10.5.
(d) None
-38-
<PAGE>
<PAGE>
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 County of St. Louis, State of Missouri, on this 14th day of April,
2000.
PGI INCORPORATED
(Registrant)
By: /s/ Laurence A. Schiffer
------------------------
Laurence A. Schiffer, President
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
- --------- ----- -----
<S> <C> <C>
/s/ Andrew S. Love, Jr. Chairman of the Board April 14, 2000
- ------------------------ Secretary
Andrew S. Love, Jr.
/s/ Laurence A. Schiffer Vice Chairman of the April 14, 2000
- ------------------------ Board, President, Principal
Laurence A. Schiffer Executive Officer, Principal
Financial Officer and
Principal Accounting Officer
</TABLE>
-39-
<PAGE>
<PAGE>
EXHIBIT INDEX
2. Inapplicable.
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, 1997 ("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 the Registrant by the Board of
Directors of PGI Incorporated by the Unanimous Written
Consent, dated as of March 17, 1995 (filed as Exhibit 3.5 to
the December 31, 1995 Form 10KSB and incorporated herein by
reference).
3.6 Articles of Incorporation of PGI Incorporated as amended
through December 22, 1997 (filed as Exhibit 3.1 to
Registrant's June 30, 1998 Form 10-QSB and incorporated
herein by reference).
3.7 Restated Articles of Incorporation of PGI Incorporated
executed September 4, 1998 with certificate from the State
of Florida dated October 27, 1998 (filed as Exhibit 3.1 to
Registrant's September 30, 1998 Form 10-QSB and incorporated
herein by reference).
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
-40-
<PAGE>
<PAGE>
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).
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 the 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).
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
-41-
<PAGE>
<PAGE>
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 Registrant's 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).
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).
4.17 Note Purchase and Loan Transaction dated as of March 28,
1996, by First Union National Bank of Florida, PGIP, LLC,
PGI Incorporated, Sugarmill Woods, Inc., Burnt Store Marina,
Inc. and Gulf Coast Credit Corporation (filed as Exhibit
4.17 to Registrant's Form 10-KSB/A dated August 27, 1997,
and incorporated herein by reference).
-42-
<PAGE>
<PAGE>
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 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).
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).
10.6 Option Agreement For Sale and Purchase dated January 31,
1997, between Sugarmill Woods, Inc., Love-PGI Partners,
L.P., and The Nature Conservancy (filed as Exhibit 10.6 to
Registrant's Form 10-KSB/A dated August 27, 1997 and
incorporated herein by reference).
10.7 First Amendment to Option Agreement for Sale and Purchase
dated August 25, 1997 between Sugarmill Woods, Inc., Love-
PGI Partners, L.P., and The Nature Conservancy (filed as
part of Appendix B to Registrant's Proxy Statement dated
December 8, 1997 and incorporated herein by reference).
10.8 Second Amendment to Option Agreement for Sale and Purchase
dated September 29, 1997 between Sugarmill Woods, Inc.,
Love-PGI Partners, L.P., and The Nature Conservancy (filed
as part of Appendix B to Registrant's Proxy Statement dated
December 8, 1997 and incorporated herein by reference).
11. See Note 18 to the consolidated financial statements.
-43-
<PAGE>
<PAGE>
13. Inapplicable.
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.
21. Subsidiaries of the Registrant, filed herein.
22. Inapplicable.
23. Consent of Independent Certified Public Accountants, filed
herein.
24. Inapplicable.
27. Financial Data Schedule, filed herein.
99. Inapplicable.
-44-
<PAGE>
<TABLE>
EXHIBIT 21 PGI INCORPORATED PAGE 1 OF 1
- ---------- ----------------
SUBSIDIARIES
------------
<CAPTION>
State of Relationship
-------- ------------
Incorporation
-------------
<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 Construction, Inc. Florida Wholly owned by
Sugarmill Woods, Inc.
<FN>
- ---------------------------------------
<F1> Included in the Company's consolidated financial statements.
</TABLE>
<PAGE>
Exhibit 23
- ----------
CONSENT OF INDEPENDENT CERTIFIED PUBLIC 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 March 17, 2000, relating to the
consolidated financial statements and financial statements schedule
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 /s/ BDO Seidman, LLP
April 10, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,469,000
<SECURITIES> 0
<RECEIVABLES> 419,000
<ALLOWANCES> (376,000)
<INVENTORY> 763,000
<CURRENT-ASSETS> 0<F1>
<PP&E> 31,000
<DEPRECIATION> (31,000)
<TOTAL-ASSETS> 2,441,000
<CURRENT-LIABILITIES> 0<F1>
<BONDS> 12,472,000
<COMMON> 532,000
0
2,000,000
<OTHER-SE> (26,914,000)
<TOTAL-LIABILITY-AND-EQUITY> 2,441,000
<SALES> 27,000
<TOTAL-REVENUES> 136,000
<CGS> 3,000
<TOTAL-COSTS> 11,000
<OTHER-EXPENSES> 527,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,847,000
<INCOME-PRETAX> (2,249,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,249,000)
<EPS-BASIC> (.54)
<EPS-DILUTED> (.54)
<FN>
<F1>Current Assets and Current Liabilities values are zero
because of an unclassified balance sheet.
</TABLE>
