-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ex8TZpZfKejz39JaJS2t94WrH03ntpmLLGeal5san933nnHsFXcEQTYbF16leMhk yP+KX5XycR4T06T8tjFAxg== 0001068800-06-001429.txt : 20061114 0001068800-06-001429.hdr.sgml : 20061114 20061114160750 ACCESSION NUMBER: 0001068800-06-001429 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20060930 FILED AS OF DATE: 20061114 DATE AS OF CHANGE: 20061114 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PGI INC CENTRAL INDEX KEY: 0000081157 STANDARD INDUSTRIAL CLASSIFICATION: OPERATIVE BUILDERS [1531] IRS NUMBER: 590867335 STATE OF INCORPORATION: FL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 001-06471 FILM NUMBER: 061215138 BUSINESS ADDRESS: STREET 1: 212 SOUTH CENTRAL STREET 2: SUITE 100 CITY: ST LOUIS STATE: MO ZIP: 63105 BUSINESS PHONE: 3145128650 MAIL ADDRESS: STREET 1: 212 SOUTH CENTRAL STREET 2: SUITE 100 CITY: ST LOUIS STATE: MO ZIP: 63105 FORMER COMPANY: FORMER CONFORMED NAME: PUNTA GORDA ISLES INC DATE OF NAME CHANGE: 19900403 10QSB 1 pgiq.txt U.S SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10 - QSB (Mark One) QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES |X| EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2006 ---------------------- TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES | | EXCHANGE ACT OF 1934 For the transition period from to ----------------- ------------------ Commission File Number 1-6471 -------------------- PGI INCORPORATED ---------------- (Exact name of small business issuer as specified in its charter) FLORIDA 59-0867335 ------------------------------------- ------------------- (State or other jurisdiction (I.R.S. Employer of incorporation) Identification No.) 212 SOUTH CENTRAL, SUITE 100, ST. LOUIS, MISSOURI 63105 -------------------------------------------------------- (Address of principal executive offices) (314) 512-8650 -------------- (Issuer's telephone number) N/A --------------------------------------------------------------- (Former Name, Former Address and Former Fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15 (d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ---------- ---------- Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No X ---------- ---------- State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of November 14, 2006, there were 5,317,758 shares of the issuer's common stock, $.10 par value per share, outstanding. Transitional Small Business Disclosure Format (Check one): Yes No X ---------- ---------- 1 PGI INCORPORATED AND SUBSIDIARIES Form 10 - QSB For the Quarter Ended September 30, 2006 Table of Contents -----------------
Form 10 - QSB Page No. ------------- PART I Financial Information Item 1. Financial Statements Condensed Consolidated Statements of Financial Position September 30, 2006 (Unaudited) and December 31, 2005 3 Condensed Consolidated Statements of Operations (Unaudited) Three and Nine Months Ended September 30, 2006 and 2005 4 Condensed Consolidated Statements of Cash Flows (Unaudited) Nine Months Ended September 30, 2006 and 2005 5 Notes to Consolidated Financial Statements (Unaudited) 6 Item 2. Management's Discussion and Analysis or Plan of Operation 12 Item 3. Controls and Procedures 16 PART II Other Information Item 1. Legal Proceedings 17 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 17 Item 3. Defaults Upon Senior Securities 17 Item 4. Submission of Matters to a Vote of Security Holders 17 Item 5. Other Information 17 Item 6. Exhibits 17 SIGNATURE 18 EXHIBIT INDEX 19
2 PART I FINANCIAL INFORMATION Item 1. Financial Statements PGI INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION ($ in thousands)
September 30, December 31, 2006 2005 ---- ---- (Unaudited) ASSETS Cash and cash equivalents $ 4 $ 147 Restricted cash 5 255 Receivables 934 633 Land and improvement inventories 642 637 Other assets 199 178 -------- -------- $ 1,784 $ 1,850 ======== ======== LIABILITIES Accounts payable & accrued expenses $ 55 $ 49 Accrued real estate taxes 11 312 Accrued interest: Primary Lender 22 5 Debentures 27,048 24,752 Other 2,417 2,331 Credit Agreements - Primary lender 500 500 Notes payable 1,198 1,198 Subordinated debentures payable 9,059 9,059 Convertible debentures payable 1,500 1,500 -------- -------- $ 41,810 $ 39,706 -------- -------- 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) 2,000 2,000 Common stock, par value $.10 per share; authorized 25,000,000 shares; 5,317,758 shares issued and outstanding 532 532 Paid in capital 13,498 13,498 Accumulated deficit (56,056) (53,886) -------- -------- (40,026) (37,856) -------- -------- $ 1,784 $ 1,850 ======== ======== See accompanying notes to condensed consolidated financial statements.
3 Part I Financial Information (Continued) PGI INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS ($ in thousands, except per share data) (Unaudited)
Three Months Ended Nine Months Ended ------------------ ----------------- September 30, September 30, September 30, September 30, 2006 2005 2006 2005 ---- ---- ---- ---- REVENUES Real Estate Sales $ - $ - $ 10 $ 195 Interest Income 22 12 60 30 Other Income 313 - 318 192 -------- -------- -------- -------- 335 12 388 417 -------- -------- -------- -------- COSTS AND EXPENSES Cost of Real Estate Sales $ - $ - $ - $ 14 Interest 832 749 2,431 2,188 Taxes & Assessments 4 2 13 (3) Consulting & Accounting 11 11 31 31 Legal & Professional 14 2 37 17 General & Administrative 13 19 46 38 -------- -------- -------- -------- 874 783 2,558 2,285 -------- -------- -------- -------- NET (LOSS) $ (539) $ (771) $ (2,170) $ (1,868) ======== ======== ======== ======== NET (LOSS) PER SHARE (*) $ (.13) $ (.18) $ (.50) $ (.44) ======== ======== ======== ======== * Considers the effect of cumulative preferred dividends in arrears for the three and nine months ended September 30, 2006 and 2005. See accompanying notes to condensed consolidated financial statements
4 Part I Financial Information (Continued) PGI INCORPORATED AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS ($ in thousands) (Unaudited)
Nine Months Ended ----------------- September 30, September 30, 2006 2005 ---- ---- Net cash provided by (used in) operating activities $ (107) $ 238 -------- -------- Cash flows from investing activities: Proceeds from restricted cash 252 - Investment in notes receivable (273) (110) Purchases of inventory and deferred expenditures (15) (4) -------- -------- Net cash (used in) investing activities (36) (114) -------- -------- Net increase (decrease) in cash (143) 124 Cash at beginning of period 147 201 -------- -------- Cash at end of period $ 4 $ 325 ======== ======== See accompanying notes to condensed consolidated financial statements
5 PGI INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (Unaudited) (1) Basis of Presentation The accompanying unaudited condensed consolidated financial statements of PGI Incorporated and its subsidiaries (the "Company") have been prepared in accordane with the instructions to Form 10 - QSB and therefore do not include all disclosures necessary for fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. The Company's independent accountants included an explanatory paragraph regarding the Company's ability to continue as a going concern in their opinion on the Company's condensed consolidated financial statements for the year ended December 31, 2005. The consolidated balance sheet as of December 31, 2005 has been derived from the audited consolidated balance sheet as of that date. The Company remains in default under the indentures governing its unsecured subordinated debentures and collateralized convertible debentures and in default of its primary debt obligations. (See Management's Discussion and Analysis or Plan of Operation and Notes 9, 10, 11, and 16 to the Company's condensed consolidated financial statements for the year ended December 31, 2005, as contained in the Company's Annual Report on Form 10 - KSB). All adjustments (consisting of only normal recurring accruals) necessary for fair presentation of financial position, results of operations and cash flows have been made. The results for the nine months ended September 30, 2006 are not necessarily indicative of operations to be expected for the fiscal year ending December 31, 2006 or any other interim period. (2) Per Share Data Basic per share amounts are computed by dividing net income (loss), after considering cumulative dividends in arrears on the Company's preferred stock, by the average number of common shares and common stock equivalents outstanding. For this purpose, the Company's cumulative convertible preferred stock and collateralized convertible debentures are not deemed to be common stock equivalents. The average number of common shares outstanding for the nine months ended September 30, 2006 and 2005 was 5,317,758. Diluted per share amounts are computed by dividing net income (loss) by the average number of common shares outstanding, after adjusting for the estimated effect of the assumed conversion of all cumulative convertible preferred stock and collateralized convertible debentures into shares of common stock. For the nine months ended September 30, 2006 and 2005, the assumed conversion of all cumulative convertible preferred stock and collateralized convertible debentures would have been anti-dilutive. 6 PGI INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (continued) The following is a summary of the calculations used in computing basic and diluted (loss) per share for the three and nine months ended September 30, 2006 and 2005.
Three Months Ended Nine Months Ended ------------------ ----------------- September 30, September 30, September 30, September 30, 2006 2005 2006 2005 ---- ---- ---- ---- Net (Loss) $ (539,000) $ (771,000) $ (2,170,000) $ (1,868,000) Preferred Dividends $ (160,000) $ (160,000) $ (480,000) $ (480,000) ------------ ------------ ------------ ------------ (Loss) Available to Common Shareholders $ (699,000) $ (931,000) $ (2,650,000) $ (2,348,000) ============ ============ ============ ============ Weighted Average Number Of Shares Outstanding 5,317,758 5,317,758 5,317,758 5,317,758 Basic and Diluted (Loss) Per Share $ (.13) $ (.18) $ (.50) $ (.44)
(3) Statement of Cash Flows The Financial Accounting Standards Board issued Statement No. 95, "Statement of Cash Flows", which requires a statement of cash flows as part of a full set of financial statements. For quarterly reporting purposes, the Company has elected to condense the reporting of its net cash flows. Interest paid for the nine months ended September 30, 2006 and 2005 was $32,000 and $41,000, respectively. (4) Restricted Cash Restricted cash includes restricted proceeds held by the primary lender as collateral for debt repayment. 7 PGI INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (continued) (5) Receivables Net receivables consisted of:
September 30, December 31, 2006 2005 ---- ---- ($ in thousands) Receivables on real estate sales $ - $ 1 Other notes receivable - related party 873 600 Other interest receivable 61 32 -------- -------- $ 934 $ 633 ======== ========
(6) Land and Improvements Land and improvement inventories consisted of:
September 30, December 31, 2006 2005 ---- ---- ($ in thousands) Unimproved land $ 626 $ 621 Fully improved land 16 16 -------- -------- $ 642 $ 637 ======== ========
(7) Other Assets Other assets consisted of:
September 30, December 31, 2006 2005 ---- ---- ($ in thousands) Deposit with Trustee of 6-1/2% debentures $ 170 $ 165 Other 29 13 -------- -------- $ 199 $ 178 ======== ========
8 PGI INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (continued) (8) Accounts Payable and Accrued Expenses Accounts payable and accrued expenses consisted of:
September 30, December 31, 2006 2005 ---- ---- ($ in thousands) Accounts payable $ 17 $ 12 Accrued audit & professional 23 31 Accrued legal 1 - Accrued consulting fees 4 6 Accrued accounting services 6 - Accrued miscellaneous 4 - -------- -------- $ 55 $ 49 ======== ======== Accrued Real Estate Taxes consisted of: Current real estate taxes $ 11 $ - Delinquent real estate taxes - 312 -------- -------- $ 11 $ 312 ======== ========
(9) Primary Lender Credit Agreements, Notes Payable, Subordinated and Convertible Debentures Payable Credit agreements with the Company's primary lender and notes payable consisted of the following:
September 30, December 31, 2006 2005 ---- ---- ($ in thousands) Credit agreements - primary lender: (maturing June 1, 1997, bearing interest at prime plus 5%) $ 500 $ 500 Notes payable - $1,176,000 bearing interest at prime plus 2% 1,198 1,198 -------- -------- $ 1,698 $ 1,698 -------- -------- Subordinated debentures payable: At 6-1/2% interest; due June 1, 1991 1,034 1,034 At 6% interest; due May 1, 1992 8,025 8,025 -------- -------- $ 9,059 $ 9,059 -------- --------
9 PGI INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (continued) Collateralized convertible debentures payable: At 14% interest; due July 8, 1997, convertible into shares of common stock at $1.72 per share 1,500 1,500 ------- ------- $12,257 $12,257 ======= =======
(10) Real Estate Sales and Other Income Real Estate Sales and Cost of Sales for the three and nine months ended September 30, 2006 and 2005 were as follows:
Three Months Ended Nine Months Ended ------------------ ----------------- ($ in thousands) ($ in thousands) September 30, September 30, September 30, September 30, 2006 2005 2006 2005 ---- ---- ---- ---- Real Estate Sales $ - $ - $ 10 $195 Cost of Sales - - - 14
In the second quarter of 2006, the Company completed the sale of a small piece of land at the price of $10,000. This odd remnant of a lot was not carried for any value on the Company's books. In the first quarter of 2005, the Company completed the sale of an unusual real estate parcel, at the price of $175,000. This parcel was not carried for any value on the Company's books, inasmuch as it was an undevelopable strip of mangrove fringe. However, because of the height of the mangroves, the adjoining property owner purchased this fringe strip in order to be able to enhance the view amenity on his proposed development. Other income for the nine months ended September 30, 2006 and 2005 was $318,000 and $192,000, respectively. Other income for the three and nine months ended September 30, 2006 includes $312,000 as a result of the reversal of accrued real estate taxes from 1997 which had been in litigation with Citrus County, and has been finally concluded. During the nine months ended September 30, 2005, the Company foreclosed on ten lots in Citrus County and received proceeds of $134,000 for delinquent receivables. (11) Income Taxes At December 31, 2005, the Company had an operating loss carryforward of approximately $38,000,000 to reduce future taxable income. These operating losses expire at various dates through 2025. 10 PGI INCORPORATED AND SUBSIDIARIES Notes to Condensed Consolidated Financial Statements (continued) The following summarizes the temporary differences of the Company at September 30, 2006 and December 31, 2005 at the current statutory rate:
September 30, December 31, 2006 2005 ---- ---- ($ in thousands) Deferred tax asset: Net operating loss carryforward $ 15,250 $ 14,729 Adjustments to reduce land to net realizable value 12 12 Expenses capitalized under IRC 263(a) 56 56 Valuation allowance (15,146) (14,625) -------- -------- 172 172 Deferred tax liability: Basis difference of land and improvement inventories 172 172 -------- -------- Net deferred tax asset $ - $ - ======== ========
11 PGI INCORPORATED AND SUBSIDIARIES Item 2. Management's Discussion and Analysis or Plan of Operation Preliminary Note The Company's most valuable remaining asset is a parcel of 366 acres located in Hernando County, Florida. The Company also owns some minor parcels of real estate which are sites scattered throughout Charlotte County, Florida, but most of these are subject to easements which markedly reduce their value and/or consist of wetlands of indeterminable value. As of September 30, 2006, the Company also owns 8 single family lots, located in Citrus County, Florida. The 366 acre parcel in Hernando County is difficult to value because of uncertainty related to the possible extension of the Suncoast Expressway, which terminates on the south side of Route 98 opposite the subject property. Planning continues for the proposed northward continuation of the Suncoast Expressway, with the route presently believed to be the most probable being along the western boundary of this parcel of property. However, until and unless the uncertainty regarding the future expansion of the Suncoast Expressway is resolved, planning with respect to this property is difficult. Results of Operations Revenues for the first nine months of 2006 decreased by $29,000 to $388,000 from $417,000 for the comparable 2005 period primarily as a result of less real estate sales revenue of $185,000, offset by an increase in other income of $126,000 as further described below. Expenses for the nine month period ended September 30, 2006 increased by $273,000 when compared to the same period in 2005 primarily resulting from an increase in interest expense of $243,000. In addition, taxes and assessments increased during the first nine months of 2006 by $16,000 compared to the same period in 2005 as a result of a negative expense in 2005 due to the reversal of accrued taxes on lots for which foreclosure was completed in 2005 by sales for delinquent receivables. As a result, a net loss of $2,170,000 was incurred for the first nine months of 2006 compared to a net loss of $1,868,000 for the first nine months of 2005. After consideration of cumulative preferred dividends in arrears, totaling $480,000 for each of the nine months ended September 30, 2006 and 2005, a net loss per share of $(.50) and $(.44) was reported for the nine month periods ended September 30, 2006 and 2005, respectively. The total cumulative preferred dividends in arrears through September 30, 2006 is $7,315,000. Real Estate Sales and Cost of Sales consisted of:
Three Months Ended Nine Months Ended ------------------ ----------------- ($ in thousands) $ in thousands) September 30, September 30, September 30, September 30, 2006 2005 2006 2005 ---- ---- ---- ---- Real Estate Sales $ - $ - $ 10 $195 Cost of Sales - - - 14
12 PGI INCORPORATED AND SUBSIDIARIES Item 2. Management's Discussion and Analysis or Plan of Operation (continued) In the second quarter of 2006, the Company completed the sale of a small piece of land at the price of $10,000. This odd remnant of a lot was not carried for any value on the Company's books. There were no sales of real estate in the second or third quarters of 2005. In the first quarter of 2005, the Company completed the sale of an unusual real estate parcel, at the price of $175,000. This parcel was not carried for any value on the Company's books, inasmuch as it was an undevelopable strip of mangrove fringe. However, because of the height of the mangrove, the adjoining property owner purchased this fringe strip in order to be able to enhance the view amenity on his proposed developments. Other income for the nine months ended September 30, 2006 and 2005 was $318,000 and $192,000, respectively. Other income for the three and nine months ended September 30, 2006 includes $312,000 which resulted from the reversal of accrued real estate taxes due to the ultimate conclusion of the lawsuit in Citrus County regarding the 1997 agricultural exemption status of the Company's undeveloped Sugarmill Woods property. The initial resolution of this lawsuit was reported in the Form 10-QSB filed by the Company on May 13, 2005. During the nine months ended September 30, 2005, the Company foreclosed on ten lots and received proceeds of $134,000 for delinquent contract receivables. As of September 30, 2006, the Company remained in default of its primary lender indebtedness with PGIP, LLC ("PGIP") of $500,000. PGIP holds restricted funds of the Company pursuant to an escrow agreement whereby funds may be disbursed (i) as requested by the Company and agreed to by PGIP, (ii) as deemed necessary and appropriate by PGIP, to protect PGIP's interest in the Retained Acreage (as hereinafter defined), including PGIP's right to receive principal and interest under the note agreement securing the remaining indebtedness, or (iii) to PGIP to pay any other obligations owed to PGIP by the Company. The restricted escrow funds held by PGIP at September 30, 2006 and December 31, 2005 were $5,000 and $255,000, respectively. With the approval of PGIP, the Company utilized $252,000 of the restricted escrow funds during the nine months ended September 30, 2006 to pay $32,000 in accrued interest to PGIP, $200,000 to invest in a short term note with an affiliate of L-PGI, the Company's preferred shareholder, Love Investment Company, and $20,000 for operating expenditures. The primary parcel of real estate owned by the Company, totaling 366 acres (the "Retained Acreage"), remains subject to the primary lender indebtedness. Cash used in operating activities for the nine months ended September 30, 2006 was $107,000 compared to cash provided by operating activities of $238,000 for the comparable 2005 period, primarily as a result of the sales of the unusual real estate parcels and the recovery of contracts receivable during the 2005 period, both as described above, which did not occur during the comparable period in 2006. Net cash provided by investing activities during the nine months ended September 30, 2006 was from proceeds of restricted cash in the amount of $252,000. Net cash used in investing activities during the nine months ended September 30, 2006 consisted of a $273,000 investment in a short-term note with Love Investment Company, an affiliate of L-PGI, the Company's preferred shareholder, and $15,000 in real estate development expenditures. 13 PGI INCORPORATED AND SUBSIDIARIES Item 2. Management's Discussion and Analysis or Plan of Operation (continued) Analysis of Financial Condition Total assets decreased by $66,000 at September 30, 2006 compared to total assets at December 31, 2005, reflecting the following changes:
September 30, December 31, Increase 2006 2005 (Decrease) ---- ---- ---------- ($ in thousands) Cash and cash equivalents $ 4 $ 147 $ (143) Restricted cash 5 255 (250) Receivables 934 633 301 Land and improvement inventories 642 637 5 Other assets 199 178 21 -------- -------- -------- $ 1,784 $ 1,850 $ (66) ======== ======== ========
Liabilities were approximately $41.8 million at September 30, 2006 compared to approximately $39.7 million at December 31, 2005, reflecting the following changes:
September 30, December 31, Increase 2006 2005 (Decrease) ---- ---- ---------- ($ in thousands) Accounts payable & accrued expenses $ 55 $ 49 $ 6 Accrued real estate taxes 11 312 (301) Accrued interest 29,487 27,088 2,399 Credit agreements - primary lender 500 500 - Notes 1,198 1,198 - Convertible subordinated debentures payable 9,059 9,059 - Convertible debentures payable 1,500 1,500 - -------- -------- -------- $ 41,810 $ 39,706 $ 2,104 ======== ======== ========
The Company remains totally dependent upon the sale of its parcels of property to fund its operations and debt service requirements. 14 PGI INCORPORATED AND SUBSIDIARIES Item 2. Management's Discussion and Analysis or Plan of Operation (continued) The Company remains in default of the entire principal amount plus interest,(including certain sinking fund and interest payments with respect to its subordinated debentures) on its subordinated and convertible debentures and notes payable, as well as its primary lender indebtedness with PGIP. The amounts due are as indicated in the following table:
September 30, 2006 ------------------ Principal Accrued Amount Due Interest ---------- -------- ($ in thousands) Subordinated debentures: ------------------------ At 6 1/2%, due June 1, 1991 $ 1,034 $ 1,166 At 6%, due May 1, 1992 8,025 11,684 -------- -------- $ 9,059 $ 12,850 ======== ======== Collateralized convertible debentures: -------------------------------------- At 14%, due July 8, 1997 $ 1,500 $ 14,198 ======== ======== Notes Payable: -------------- At prime plus 2% $ 1,176 $ 2,417 on-interest bearing 22 - -------- -------- $ 1,198 $ 2,417 ======== ======== Primary Lender: $ 500 $ 22 --------------- ======== ========
The Company does not have sufficient funds available to satisfy either principal or interest obligations on the above debentures and notes payable. Forward Looking Statements - -------------------------- The discussion set forth in this Item 2, as well as other portions of this Form 10-QSB, may contain forward-looking statements. Such statements are based upon the information currently available to management of the Company and management's perception thereof as of the date of the Form 10-QSB. When used in this Form 10-QSB, words such as "anticipates," "estimates," "believes," "expects," and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks and uncertainties. Actual results of the Company's operations could materially differ from those forward-looking statements. The differences could be caused by a number of factors or combination of factors including, but not limited to: changes in the real estate market in Florida and the counties in which the Company owns any property; institution of legal action by the bondholders for collection of any amounts due under the subordinated or convertible debentures; continued failure by governmental authorities to make a decision with respect to the Suncoast Expressway as described under Item 2; changes in management strategy; and other factors set forth in reports and other documents filed by the Company with the Securities and Exchange Commission from time to time. 15 PGI INCORPORATED AND SUBSIDIARIES Item 3. Controls and Procedures The Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures under the supervision and with the participation of its Chief Executive Officer ("CEO") and Chief Financial Officer ("CFO"). Based on this evaluation, the Company's management, including the CEO and CFO, concluded that the Company's disclosure controls and procedures were effective as of September 30, 2006. There have been no changes in the Company's internal control over financial reporting during the quarter ended September 30, 2006 that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting. 16 PGI INCORPORATED AND SUBSIDIARIES PART II OTHER INFORMATION Item 1. Legal Proceedings The Company is a party to routine legal proceedings incidental to the normal operation of its business. The Company does not believe that the resolution of any such proceedings individually, or collectively, will have a material effect on its financial position. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds Not applicable. Item 3. Defaults Upon Senior Securities See discussion in Item 2 of Part 1 with respect to defaults on the Company's subordinated debentures and collateralized convertible debentures and with respect to cumulative preferred dividends in arrears, which discussions are incorporated herein by this reference. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information Not applicable. Item 6. Exhibits Reference is made to the Exhibit Index hereof for a list of exhibits filed under this Item. 17 PGI INCORPORATED AND SUBSIDIARIES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. PGI INCORPORATED ---------------- (Registrant) Date: November 14, 2006 /s/ Laurence A. Schiffer --------------------- ----------------------------------- Laurence A. Schiffer President (Duly Authorized Officer, Principal Executive Officer and Principal Financial Officer) 18 PGI INCORPORATED AND SUBSIDIARIES EXHIBIT INDEX - ------------- 2. Inapplicable. 3.(i) Inapplicable. 3.(ii) Inapplicable. 4. Inapplicable. 10. Inapplicable. 11. Statement re: Computation of Per Share Earnings (Set forth in Note 2 of the Notes to Condensed Consolidated Financial Statements (Unaudited) herein). 15 Inapplicable. 18. Inapplicable. 19. Inapplicable. 20. Inapplicable. 22. Inapplicable. 23. Inapplicable. 24. Inapplicable. 31.1 Principal Executive Officer certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended. 31.2 Principal Financial Officer certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended. 32.1 Chief Executive Officer certification pursuant to 18 U.S.C. Section 1350. 32.2 Chief Financial Officer certification pursuant to 18 U.S.C. Section 1350. 19 EX-31.1 2 ex31p1.txt Exhibit 31.1 RULE 13a - 14(a) CERTIFICATION ------------- I, Laurence A. Schiffer, certify that; 1. I have reviewed this quarterly report on Form 10-QSB of PGI Incorporated; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [reserved for future use;] c) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. /s/ Laurence A. Schiffer November 14, 2006 - -------------------------------- Laurence A. Schiffer Principal Executive Officer EX-31.2 3 ex31p2.txt Exhibit 31.2 RULE 13a - 14(a) CERTIFICATION ------------- I, Laurence A. Schiffer, certify that; 1. I have reviewed this quarterly report on Form 10-QSB of PGI Incorporated; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) [reserved for future use;] c) evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. /s/ Laurence A. Schiffer November 14, 2006 - -------------------------------- Laurence A. Schiffer Principal Financial Officer EX-32.1 4 ex32p1.txt Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350 * In connection with the Quarterly Report of PGI Incorporated (the "Company") on Form 10-QSB for the period ended September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Laurence A. Schiffer, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Laurence A. Schiffer - -------------------------------- Laurence A. Schiffer Chief Executive Officer (Principal Executive Officer) November 14, 2006 * A signed original of this written statement has been provided to the Company and will be retained by the Company and will be furnished to the Securities and Exchange Commission or its staff upon request. EX-32.2 5 ex32p2.txt Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350* In connection with the Quarterly Report of PGI Incorporated (the "Company") on Form 10-QSB for the period ended September 30, 2006 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Laurence A. Schiffer, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ Laurence A. Schiffer - -------------------------------- Laurence A. Schiffer Chief Financial Officer (Principal Financial Officer) November 14, 2006 * A signed original of this written statement has been provided to the Company and will be retained by the Company and will be furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----