10-Q

U.S SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10 – Q

(Mark One)
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES  EXCHANGE ACT OF 1934
	For the quarterly period ended    September 30, 2011
o	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 registrant as specified in its charter)

FLORIDA	9-0867335
(State or other jurisdiction of incorporation)	(I.R.S. Employer Identification No.)

212 SOUTH CENTRAL, SUITE 100, ST. LOUIS, MISSOURI  63105

(Address of principal executive offices)

(314) 512-8650

(Registrant’s telephone number, including area code)

 N/A                                                                                                                                                                                                                                                       

(Former Name, Former Address and Former Fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes    X        No _______

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes    X        No _______

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer__________   Accelerated filer__________Non-accelerated filer____________   Smaller reporting company    X     

           (Do not check if a smaller reporting company)

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 registrant's classes of common equity, as of the latest practicable date:  As of November 14, 2011, there were 5,317,758 shares of the registrant’s common stock, $.10 par value per share, outstanding.

1

PGI INCORPORATED AND SUBSIDIARIES

Form 10 – Q

For the Quarter Ended September 30, 2011

Table of Contents

		Form 10 - Q Page No.
PART I	FINANCIAL INFORMATION
Item 1.	Financial Statements Condensed Consolidated Statements of Financial Position     September 30, 2011 (Unaudited) and December 31, 2010	3
	Condensed Consolidated Statements of Operations (Unaudited)     Three and Nine Months Ended September 30, 2011 and 2010	4
	Condensed Consolidated Statements of Cash Flows (Unaudited)     Nine Months Ended September 30, 2011 and 2010	5
	Notes to Condensed Consolidated Financial Statements (Unaudited)	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	11
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	14
Item 4.	Controls and Procedures	14
PART II	OTHER INFORMATION
Item 1.	Legal Proceedings	15
Item 1A.	Risk Factors	15
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	15
Item 3.	Defaults Upon Senior Securities	15
Item 4.	[Removed and Reserved]	15
Item 5.	Other Information	15
Item 6.	Exhibits	15
SIGNATURE		16
EXHIBIT INDEX		17

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,
	2011			2010
	(Unaudited)
ASSETS
Cash	$	1		$	1
Restricted cash		5			5
Receivables		639			705
Land and improvement inventories		639			639
Other assets		197			189
	$	1,481		$	1,539
LIABILITIES
Accounts payable and accrued expenses	$	116		$	121
Accrued real estate taxes		6			9
Accrued interest:
Primary lender		272			240
Debentures		48,048			44,121
Other		2,819			2,773
Credit agreements –
Primary lender		500			500
Notes payable		1,198			1,198
Subordinated convertible debentures payable		9,059			9,059
Convertible debentures payable		1,500			1,500
		63,518			59,521
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		(78,067	)		(74,012	)
		(62,037	)		(57,982	)
	$	1,481		$	1,539

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,
	2011			2010			2011			2010
REVENUES
Real estate sales	$	-		$	-		$	16		$	-
Interest income		10			11			31			34
Other income		-			-			-			1
		10			11			47			35
COSTS AND EXPENSES
Cost of real estate sales		-			-			1			-
Interest		1,372			1,229			4,005			3,590
Taxes and assessments		2			2			7			8
Consulting and accounting		10			10			30			30
Legal and professional		6			5			11			11
General and administrative		17			14			48			44
		1,407			1,260			4,102			3,683
NET LOSS	$	(1,397	)	$	(1,249	)	$	(4,055	)	$	(3,648	)
NET LOSS PER SHARE (*)
AVAILABLE TO COMMON
STOCKHOLDERS-Basic and diluted	$	(.29	)	$	(.26	)	$	(.85	)	$	(.78	)

* Considers the effect of cumulative preferred dividends in arrears for the three and nine months ended September 30, 2011 and 2010.

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,
		2011			2010
Net cash used in operating activities	$	(66	)	$	(51	)
Cash flows from investing activities:
Proceeds from notes receivable		66			52
Net cash provided by investing activities		66			52
Net change in cash		-			1
Cash at beginning of period		1			1
Cash at end of period	$	1		$	2

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 accordance with the instructions to Form 10 - Q and therefore do not include all disclosures necessary for fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles.  The Company's independent registered public accounting firm included an explanatory paragraph regarding the Company's ability to continue as a going concern in their opinion on the Company's consolidated financial statements for the year ended December 31, 2010.

Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted.  These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K annual report for 2010 filed with the Securities and Exchange Commission.

The condensed consolidated balance sheet as of December 31, 2010 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 of Financial Condition and Results of Operations and Notes 7, 8, and 9 to the Company's consolidated financial statements for the year ended December 31, 2010, as contained in the Company's Annual Report on Form 10 - K).

All adjustments (consisting of only normal recurring accruals) necessary for fair presentation of financial position, results of operations and cash flows have been made.  The results for the nine months ended September 30, 2011 are not necessarily indicative of operations to be expected for the fiscal year ending December 31, 2011 or any other interim period.

 (2) Per Share Data

Basic per share amounts are computed by dividing net income (loss), after considering current period dividends on the Company's preferred stock, by the average number of common shares.  The average number of common shares outstanding for the three and nine months ended September 30, 2011 and 2010 was 5,317,758.

6

PGI INCORPORATED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

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 three and nine months ended September 30, 2011 and 2010, the assumed conversion of all cumulative convertible preferred stock and collateralized convertible debentures would have been anti-dilutive.

The following is a summary of the calculations used in computing basic and diluted loss per share for the three and nine months ended September 30, 2011 and 2010.

	Three Months Ended						Nine Months Ended
	September 30,  2011			September 30, 2010			September 30, 2011			September 30, 2010
Net Loss	$	(1,397,000	)	$	(1,249,000	)	$	(4,055,000	)	$	(3,648,000	)
Preferred Dividends		(160,000	)		(160,000	)		(480,000	)		(480,000	)
Loss Available to Common Shareholders	$	(1,557,000	)	$	(1,409,000	)	$	(4,535,000	)	$	(4,128,000	)
Weighted Average Number Of Common Shares Outstanding		5,317,758			5,317,758			5,317,758			5,317,758
Basic and Diluted Loss Per Share	$	(.29	)	$	(.26	)	$	(.85	)	$	(.78	)

(3)          Statement of Cash Flows

The Financial Accounting Standards Board Accounting Standards Codification Topic No. 230, “Statement of Cash Flows”, requires a statement of cash flows as part of a full set of financial statements.  For quarterly reporting purposes, the Company has elected to condense the reporting of its net cash flows.  There were no payments of interest for the nine month periods ended September 30, 2011 and September 30, 2010.

 (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,
	2011		2010
	($ in thousands)
Notes receivable – related party	$	638	$	704
Interest receivable – related party		1		1
	$	639	$	705

(6) Land and Improvements

Land and improvement inventories consisted of:

	September 30		December 31,
	2011		2010
	($ in thousands)
Unimproved land	$	625	$	625
Fully improved land		14		14
	$	639	$	639

(7) Other Assets

Other assets consisted of:

	September 30,		December 31,
	2011		2010
	($ in thousands)
Deposit with Trustee of 6-1/2% debentures	$	184	$	184
Other		13		5
	$	197	$	189

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,
	2011		2010
	($ in thousands)
Accounts payable	$	9	$	12
Accrued audit & professional		34		36
Accrued consulting fees		2		2
Environmental remediation obligations		70		70
Accrued miscellaneous		1		1
	$	116	$	121
Accrued real estate taxes consisted of:
Current real estate taxes	$	6	$	9

 (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,
	2011		2010
	($ in thousands)
Credit agreements – primary lender:
balance is past due, bearing interest
at prime plus 5%	$	500	$	500
Notes payable - $1,176,000
bearing interest at prime plus 2%,
the remainder non-interest bearing,
all past due		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
Collateralized convertible debentures payable:
At 14% interest; due July 8, 1997,
convertible into shares of common stock		1,500		1,500
at $1.72 per share	$	12,257	$	12,257

9

PGI INCORPORATED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

(10)        Income Taxes

At December 31, 2010, the Company had an operating loss carryforward of approximately $41,809,000 available to reduce future taxable income.  These operating losses expire at various dates through 2030.

The following summarizes the temporary differences of the Company at September 30, 2011 and December 31, 2010 at the current statutory rate:

	September 30,			December 31,
	2011			2010
	($ in thousands)
Deferred tax asset:
Net operating loss carryforward	$	17,428		$	15,887
Adjustments to reduce land to net realizable value		12			12
Expenses capitalized under IRC 263(a)		56			56
Environmental liability		27			27
Valuation allowance		(17,351	)		(15,810	)
		172			172
Deferred tax liability:
Basis difference of land and improvement inventories		172			172
Net deferred tax asset	$	-		$	-

(11)        Fair Value of Financial Instruments

The carrying amount of the Company’s financial instruments, other than debt, approximates fair value at September 30, 2011 and December 31, 2010 because of the short maturity of those instruments.  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.

10

PGI INCORPORATED AND SUBSIDIARIES

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

Preliminary Note

The Company’s most valuable remaining asset is a parcel of 366 acres located in Hernando County, Florida.  As of September 30, 2011, the Company also owned 6 single family lots, located in Citrus County, Florida.  In addition, the Company owns some minor parcels of real estate in Charlotte County, and Citrus County, Florida, which totals approximately 60 acres, but these have limited value because of associated developmental constraints such as wetlands, easements, and/or other obstacles to development and sale.

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 this property.  Planning continues for the proposed northward continuation of the Suncoast Expressway, and based on an endorsement in 2007 by the Citrus County Commission to re-adopt a project that was originally approved in 1998, the route that is presently believed to be the most probable is through the middle of this parcel of property.  However, until and unless the uncertainty regarding the future expansion of the Suncoast Expressway and the related prospect of an eminent domain taking of a significant portion of the parcel is resolved, planning with respect to this property is difficult.

Results of Operations

Revenues for the three months ended September 30, 2011 decreased by $1,000 to $10,000 from $11,000 for the comparable 2010 period as a result of decreased interest income of $1,000 in the current year.  Expenses for the three months ended September 30, 2011 increased by $147,000 when compared to the same period in 2010 primarily resulting from an increase in interest expense of $143,000 due to interest accruing on past due balances and an increase in general and administrative expense of $3,000.  As a result, a net loss of $1,397,000 was incurred for the three months ended September 30, 2011 compared to a net loss of $1,249,000 for the comparable period in 2010.

Revenues for the first nine months of 2011 increased by $12,000 to $47,000 from $35,000 for the comparable 2010 period primarily as a result of real estate revenue of $16,000 from the sale of a single family lot in the first quarter of the current year.  In addition, there was a $3,000 decrease in interest income due to a lower short-term note receivable balance with Love Investment Company (“LIC”), an affiliate of L-PGI, the Company’s primary preferred stock shareholder.  Expenses for the nine month period ended September 30, 2011 increased by $419,000 when compared to the same period in 2010 primarily resulting from an increase in interest expense of $415,000 due to interest accruing on past due balances and an increase in general administrative expense of $4,000.  As a result, a net loss of $4,055,000 was incurred for the first nine months of 2011 compared to a net loss of $3,648,000 for the first nine months of 2010.  After consideration of cumulative preferred dividends in arrears, totaling $480,000 for each of the nine months ended September 30, 2011 and 2010 (based on $160,000 for each three month period therein), a net loss per share of $(.85) and $(.78) was reported for the nine month periods ended September 30, 2011 and 2010, respectively.  The total cumulative preferred dividends in arrears through September 30, 2011 is $10,515,000.

In the first quarter of 2011, the Company completed the sale of a single family lot at the price of $16,000.  This lot was carried on the Company’s books at a minimal value.  There were no sales of real estate in 2010.

11

PGI INCORPORATED AND SUBSIDIARIES

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

Interest expense during the three month and nine month periods ended September 30, 2011 increased by $143,000 and $415,000, respectively, when compared to the same periods during 2010.  This increase is a result of interest accruing on past due balances under the various credit agreements, notes payable and debentures, which increased at various intervals during the year for accrued but unpaid interest.

As of September 30, 2011, the Company remained in default of its primary lender indebtedness of $500,000 with PGIP, LLC (“PGIP”), an entity related to L-PGI, as well as under its subordinated and convertible debentures and notes payable.  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 were $5,000 at September 30, 2011 and December 31, 2010.  The Company did not utilize any of the restricted escrow funds during the nine months ended September 30, 2011 or 2010.  The primary parcel of real estate owned by the Company, totaling 366 acres and located in Hernando County, Florida (the "Retained Acreage"), remains subject to the primary lender indebtedness.

Cash Flow Analysis

During the nine month period ended September 30, 2011, the Company’s net cash used in operating activities was $66,000 compared to $51,000 for the comparable 2010 period.  Net cash provided from investing activities during the nine months ended September 30, 2011 and 2010 consisted of $66,000 and $52,000, respectively, in note receivable proceeds received from LIC.  The Company receives proceeds from its notes receivable from LIC as needed to fund its operating activities.

Analysis of Financial Condition

Total assets decreased by $58,000 at September 30, 2011 compared to total assets at December 31, 2010, reflecting the following changes:

		September 30, 2011		December 31, 2010		Increase (Decrease)
		($ in thousands)
Cash	$	1	$	1	$	-
Restricted cash		5		5		-
Receivables		639		705		(66	)
Land and improvement inventories		639		639		-
Other assets		197		189		8
	$	1,481	$	1,539	$	(58	)

During the nine month period ended September 30, 2011, the amount of receivables decreased by $66,000 due to the Company’s receipt of principal and interest payments from LIC under the note receivable from LIC, and the amount of other assets increased by $8,000 due to prepaid insurance and deferred expenses relating to services for the XBRL filing requirements with the SEC.

12

PGI INCORPORATED AND SUBSIDIARIES

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

Liabilities were approximately $63.5 million at September 30, 2011 compared to approximately $59.5 million at December 31, 2010, reflecting the following changes:

		September 30, 2011		December 31, 2010		Increase (Decrease)
		($ in thousands)
Accounts payable & accrued expenses	$	116	$	121	$	(5	)
Accrued real estate taxes		6		9		(3	)
Accrued interest		51,139		47,134		4,005
Credit agreements – primary lender		500		500		-
Notes payable		1,198		1,198		-
Subordinated convertible
debentures payable		9,059		9,059		-
Convertible debentures payable		1,500		1,500		-
	$	63,518	$	59,521	$	3,997

During the nine month period ended September 30, 2011, the amount of accounts payable and accrued expenses including accrued real estate taxes decreased by $8,000 due to timing differences and the payment of certain accrued expenses. Accrued interest increased by $4.005 million due to the amount of interest expense for such period.

The Company remains totally dependent upon the sale of its various properties to fund its operations and debt service requirements.  The Company also receives principal repayment and interest proceeds from its note receivable due from LIC on an as needed basis to fund its operating activities.

The Company remains in default on the entire principal amount plus interest (including certain sinking fund and interest payments with respect to its subordinated debentures) of its subordinated and convertible debentures and notes payable, as well as its primary lender indebtedness with PGIP.  The principal and accrued interest amounts due are as indicated in the following table:

	September 30, 2011
	Principal		Accrued
	Amount Due		Interest
	($ in thousands)
Subordinated convertible debentures:
At 6 ½%, due June 1, 1991	$	1,034	$	1,524
At 6%, due May 1, 1992		8,025		16,789
	$	9,059	$	18,313
Collateralized convertible debentures:
At 14%, due July 8, 1997	$	1,500	$	29,735
Notes Payable:
At prime plus 2%	$	1,176	$	2,819
Non-interest bearing		22		-
	$	1,198	$	2,819

13

PGI INCORPORATED AND SUBSIDIARIES

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

Primary Lender: $ 500 $ 272

The Company does not have sufficient funds available to satisfy either principal or interest obligations on the above indebtedness, debentures and notes payable.

The Company’s independent registered public accounting firm included an explanatory paragraph regarding the Company’s ability to continue as a going concern in their opinion on the Company’s consolidated financial statements for the year ended December 31, 2010.

Forward Looking Statements

The discussion set forth in this Item 2, as well as other portions of this Form 10-Q, may contain forward-looking statements.  Such statements are based upon the information currently available to management of the Company and management’s perception thereof as of the date of the Form 10-Q.  When used in this Form 10-Q, words such as “anticipates,” “estimates,” “believes,” “expects,” and similar expressions are intended to identify forward-looking statements.  Such statements are subject to risks and uncertainties.  Actual results of the Company’s operations could materially differ from those forward-looking statements.  The differences could be caused by a number of factors or combination of factors including, but not limited to:  changes in the real estate market in Florida and the counties in which the Company owns any property; institution of legal action by the bondholders for collection of any amounts due under the subordinated or convertible debentures (notwithstanding the Company’s belief that at least a portion of such actions might be barred under applicable statute of limitations); 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.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

Not applicable.

Item 4.   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, 2011.  There have been no changes in the Company’s internal control over financial reporting during the quarter ended September 30, 2011 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

14

PGI INCORPORATED AND SUBSIDIARIES

PART II	OTHER INFORMATION
Item 1.	Legal Proceedings
	The Company, to its knowledge, currently is not a party to any material legal proceedings.
Item 1A.	Risk Factors
	Not applicable.
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 under the Company's subordinated convertible debentures, collateralized convertible debentures and other indebtedness and with respect to cumulative preferred dividends in arrears, which discussions are incorporated herein by this reference.
Item 4.	[Removed and Reserved]
Item 5.	Other Information
	Not applicable.
Item 6.	Exhibits
	Reference is made to the Exhibit Index hereof for a list of exhibits filed or furnished under this Item.

15

PGI INCORPORATED AND SUBSIDIARIES

Pursuant to the requirements 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.

     PGI INCORPORATED       

(Registrant)

Date: November 14, 2011	/s/ Laurence A. Schiffer
	Laurence A. Schiffer
	President
	(Duly Authorized Officer, Principal Executive Officer and Principal Financial Officer)

16

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.
22.	Inapplicable.
23.	Inapplicable.
24.	Inapplicable.
31(i).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(i).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.
99.	Inapplicable.
100.	Inapplicable.
101.	Instance Document, Schema Document, Calculation Linkbase Document, Labels Linkbase Document, Presentation Linkbase Document and Definition Linkbase Document.*
●Furnished with this report.

17

EX-31.1

Exhibit 31(i).1

RULE 13a – 14(a)

CERTIFICATION

I, Laurence A. Schiffer, certify that;

1.   I have reviewed this quarterly report on Form 10-Q 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 registrant as of, and for, the periods presented in this report;

4.   The registrant’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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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 registrant, 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)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   evaluated the effectiveness of the registrant’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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’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 registrant’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 registrant’s internal control over financial reporting.

/s/Laurence A Schiffer                                                                                                 November 14, 2011

Laurence A. Schiffer

Principal Executive Officer

EX-31.2

Exhibit 31(i).2

RULE 13a – 14(a)

CERTIFICATION

I, Laurence A. Schiffer, certify that;

1.   I have reviewed this quarterly report on Form 10-Q 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 registrant as of, and for, the periods presented in this report;

4.   The registrant’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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant 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 registrant, 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)   designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)   evaluated the effectiveness of the registrant’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 registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.   The registrant’s other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’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 registrant’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 registrant’s internal control over financial reporting.

/s/ Laurence A. Schiffer                                                                                                  November 14, 2011

Laurence A. Schiffer

Principal Financial Officer

EX-32.1

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-Q for the period ended September 30, 2011 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) , as applicable, 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, 2011

* 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

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-Q for the period ended September 30, 2011 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), as applicable, 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, 2011

* 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.

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CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited) (Parenthetical) (USD $)	Sep. 30, 2011	Dec. 31, 2010
STOCKHOLDERS' DEFICIENCY
Preferred stock, par value (in dollars per share)	$ 1.00	$ 1.00
Preferred stock, authorized (in shares)	5,000,000	5,000,000
Preferred stock, liquidation preference (excluding cumulative dividends) (per share)	$ 8,000,000	$ 8,000,000
Common stock, par value (in dollars per share)	$ 0.10	$ 0.10
Common stock, authorized (in shares)	25,000,000	25,000,000
Common stock, issued (in shares)	5,317,758	5,317,758
Common stock, outstanding (in shares)	5,317,758	5,317,758
Preferred Class A [Member]
STOCKHOLDERS' DEFICIENCY
Preferred stock - Class A cumulative convertible shares, issued (in shares)	2,000,000	2,000,000
Preferred stock - Class A cumulative convertible shares, outstanding (in shares)	2,000,000	2,000,000

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data	3 Months Ended				9 Months Ended
	Sep. 30, 2011		Sep. 30, 2010		Sep. 30, 2011		Sep. 30, 2010
REVENUES
Real estate sales	$ 0		$ 0		$ 16		$ 0
Interest income	10		11		31		34
Other income	0		0		0		1
Total revenues	10		11		47		35
COSTS AND EXPENSES
Cost of real estate sales	0		0		1		0
Interest	1,372		1,229		4,005		3,590
Taxes and assessments	2		2		7		8
Consulting and accounting	10		10		30		30
Legal and professional	6		5		11		11
General and administrative	17		14		48		44
Total costs and expenses	1,407		1,260		4,102		3,683
NET LOSS	$ (1,397)		$ (1,249)		$ (4,055)		$ (3,648)
NET LOSS PER SHARE STOCKHOLDERS-Basic and diluted (in dollars per share)	$ (0.29)	[1]	$ (0.26)	[1]	$ (0.85)	[1]	$ (0.78)	[1]

[1] Considers the effect of cumulative preferred dividends in arrears for the three and nine months ended September 30, 2011 and 2010.

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Document And Entity Information	9 Months Ended
	Sep. 30, 2011	Nov. 14, 2011
Entity Registrant Name	PGI INC
Entity Central Index Key	0000081157
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Voluntary Filers	No
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		5,317,758
Document Fiscal Year Focus	2011
Document Fiscal Period Focus	Q3
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2011

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Other Assets

9 Months Ended

Sep. 30, 2011

Other Assets [Abstract]

Other Assets

(7) Other Assets

Other assets consisted of:

	September 30,		December 31,
	2011		2010
	($ in thousands)
Deposit with Trustee of 6-1/2% debentures	$	184	$	184
Other		13		5
	$	197	$	189

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Statement of Cash Flows

9 Months Ended

Sep. 30, 2011

Statement of Cash Flows [Abstract]

Statement of Cash Flows

(3)          Statement of Cash Flows

The Financial Accounting Standards Board Accounting Standards Codification Topic No. 230, “Statement of Cash Flows”, requires a statement of cash flows as part of a full set of financial statements.  For quarterly reporting purposes, the Company has elected to condense the reporting of its net cash flows.  There were no payments of interest for the nine month periods ended September 30, 2011 and September 30, 2010.

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Primary Lender Credit Agreements, Notes Payable, Subordinated and Convertible Debentures Payable

9 Months Ended

Sep. 30, 2011

Primary Lender Credit Agreements, Notes Payable, Subordinated and Convertible Debentures Payable [Abstract]

Primary Lender Credit Agreements, Notes Payable, Subordinated and Convertible Debentures Payable

 (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,
	2011		2010
	($ in thousands)
Credit agreements – primary lender:
balance is past due, bearing interest
at prime plus 5%	$	500	$	500
Notes payable - $1,176,000
bearing interest at prime plus 2%,
the remainder non-interest bearing,
all past due		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
Collateralized convertible debentures payable:
At 14% interest; due July 8, 1997,
convertible into shares of common stock		1,500		1,500
at $1.72 per share	$	12,257	$	12,257

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Income Taxes

9 Months Ended

Sep. 30, 2011

Income Taxes [Abstract]

Income Taxes

(10)        Income Taxes

At December 31, 2010, the Company had an operating loss carryforward of approximately $41,809,000 available to reduce future taxable income.  These operating losses expire at various dates through 2030.

The following summarizes the temporary differences of the Company at September 30, 2011 and December 31, 2010 at the current statutory rate:

	September 30,			December 31,
	2011			2010
	($ in thousands)
Deferred tax asset:
Net operating loss carryforward	$	17,428		$	15,887
Adjustments to reduce land to net realizable value		12			12
Expenses capitalized under IRC 263(a)		56			56
Environmental liability		27			27
Valuation allowance		(17,351	)		(15,810	)
		172			172
Deferred tax liability:
Basis difference of land and improvement inventories		172			172
Net deferred tax asset	$	-		$	-

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Accounts Payable and Accrued Expenses

9 Months Ended

Sep. 30, 2011

Accounts Payable and Accrued Expenses [Abstract]

Accounts Payable and Accrued Expenses

(8) Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of:

	September 30,		December 31,
	2011		2010
	($ in thousands)
Accounts payable	$	9	$	12
Accrued audit & professional		34		36
Accrued consulting fees		2		2
Environmental remediation obligations		70		70
Accrued miscellaneous		1		1
	$	116	$	121
Accrued real estate taxes consisted of:
Current real estate taxes	$	6	$	9

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Basis of Presentation

9 Months Ended

Sep. 30, 2011

Basis of Presentation [Abstract]

Basis of Presentation

(1) Basis of Presentation

The accompanying unaudited condensed consolidated financial statements of PGI Incorporated and its subsidiaries (the “Company”) have been prepared in accordance with the instructions to Form 10 - Q and therefore do not include all disclosures necessary for fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles.  The Company's independent registered public accounting firm included an explanatory paragraph regarding the Company's ability to continue as a going concern in their opinion on the Company's consolidated financial statements for the year ended December 31, 2010.

Certain information and note disclosures normally included in the Company's annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted.  These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company's Form 10-K annual report for 2010 filed with the Securities and Exchange Commission.

The condensed consolidated balance sheet as of December 31, 2010 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 of Financial Condition and Results of Operations and Notes 7, 8, and 9 to the Company's consolidated financial statements for the year ended December 31, 2010, as contained in the Company's Annual Report on Form 10 - K).

All adjustments (consisting of only normal recurring accruals) necessary for fair presentation of financial position, results of operations and cash flows have been made.  The results for the nine months ended September 30, 2011 are not necessarily indicative of operations to be expected for the fiscal year ending December 31, 2011 or any other interim period.

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Restricted Cash

9 Months Ended

Sep. 30, 2011

Restricted Cash [Abstract]

Restricted Cash

 (4)         Restricted Cash

Restricted cash includes restricted proceeds held by the primary lender as collateral for debt repayment.

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Receivables

9 Months Ended

Sep. 30, 2011

Receivables [Abstract]

Receivables

(5)   Receivables

Net receivables consisted of:

	September 30,		December 31,
	2011		2010
	($ in thousands)
Notes receivable – related party	$	638	$	704
Interest receivable – related party		1		1
	$	639	$	705

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Land and Improvements

9 Months Ended

Sep. 30, 2011

Land and Improvements [Abstract]

Land and Improvements

(6) Land and Improvements

Land and improvement inventories consisted of:

	September 30		December 31,
	2011		2010
	($ in thousands)
Unimproved land	$	625	$	625
Fully improved land		14		14
	$	639	$	639

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (USD $) In Thousands	9 Months Ended
	Sep. 30, 2011	Sep. 30, 2010
Statement of Cash Flows [Abstract]
Net cash used in operating activities	$ (66)	$ (51)
Cash flows from investing activities:
Proceeds from notes receivable	66	52
Net cash provided by investing activities	66	52
Net change in cash	0	1
Cash at beginning of period	1	1
Cash at end of period	$ 1	$ 2

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Per Share Data

9 Months Ended

Sep. 30, 2011

Per Share Data [Abstract]

Per Share Data

 (2) Per Share Data

Basic per share amounts are computed by dividing net income (loss), after considering current period dividends on the Company's preferred stock, by the average number of common shares.  The average number of common shares outstanding for the three and nine months ended September 30, 2011 and 2010 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 three and nine months ended September 30, 2011 and 2010, the assumed conversion of all cumulative convertible preferred stock and collateralized convertible debentures would have been anti-dilutive.

The following is a summary of the calculations used in computing basic and diluted loss per share for the three and nine months ended September 30, 2011 and 2010.

	Three Months Ended						Nine Months Ended
	September 30,  2011			September 30, 2010			September 30, 2011			September 30, 2010
Net Loss	$	(1,397,000	)	$	(1,249,000	)	$	(4,055,000	)	$	(3,648,000	)
Preferred Dividends		(160,000	)		(160,000	)		(480,000	)		(480,000	)
Loss Available to Common Shareholders	$	(1,557,000	)	$	(1,409,000	)	$	(4,535,000	)	$	(4,128,000	)
Weighted Average Number Of Common Shares Outstanding		5,317,758			5,317,758			5,317,758			5,317,758
Basic and Diluted Loss Per Share	$	(.29	)	$	(.26	)	$	(.85	)	$	(.78	)

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Fair Value of Financial Instruments

9 Months Ended

Sep. 30, 2011

Fair Value of Financial Instruments [Abstract]

Fair Value of Financial Instruments

(11)        Fair Value of Financial Instruments

The carrying amount of the Company's financial instruments, other than debt, approximates fair value at September 30, 2011 and December 31, 2010 because of the short maturity of those instruments.  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.

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CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited) (USD $) In Thousands	Sep. 30, 2011	Dec. 31, 2010
ASSETS
Cash	$ 1	$ 1
Restricted cash	5	5
Receivables	639	705
Land and improvement inventories	639	639
Other assets	197	189
Total asets	1,481	1,539
LIABILITIES
Accounts payable and accrued expenses	116	121
Accrued real estate taxes	6	9
Accrued interest:
Primary lender	272	240
Debentures	48,048	44,121
Other	2,819	2,773
Credit agreements -
Primary lender	500	500
Notes payable	1,198	1,198
Subordinated convertible debentures payable	9,059	9,059
Convertible debentures payable	1,500	1,500
Total liabilities	63,518	59,521
STOCKHOLDERS' DEFICIENCY
Preferred stock, par value $1.00 per share;authorized 5,000,000 shares; 2,000,000Class A cumulative convertible shares issuedand 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	(78,067)	(74,012)
Total stockholders' deficiency	(62,037)	(57,982)
Total liabilities and stockholders' deficiency	$ 1,481	$ 1,539