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    March 31, 2012

  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                                                                                                                    59-0867335                

(State or other jurisdiction of incorporation)                                                               (I.R.S. Employer Identification No.)

212 SOUTH CENTRAL, 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)

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 May 14, 2012, 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 March 31, 2012

Table of Contents

			Form 10 - Q
			Page No.
PART I		FINANCIAL INFORMATION
	Item 1.	Financial Statements
		Condensed Consolidated Statements of Financial Position
		March 31, 2012 (Unaudited) and December 31, 2011	3
		Condensed Consolidated Statements of Operations (Unaudited)
		Three Months Ended March 31, 2012 and 2011	4
		Condensed Consolidated Statements of Cash Flows (Unaudited)
		Three Months Ended March 31, 2012 and 2011	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
	Item1A.	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, except share and per share data)

		March 31,			December 31,
		2012			2011
		(Unaudited)
ASSETS
	Cash	$	1		$	1
	Restricted cash		5			5
	Receivables-related party		605			631
	Land and improvement inventories		639			639
	Other assets		189			193
		$	1,439		$	1,469
LIABILITIES
	Accounts payable and accrued expenses	$	120		$	118
	Accrued real estate taxes		2			8
	Accrued interest:
	Primary lender-related party		293			282
	Subordinated convertible debentures		18,898			18,605
	Convertible debentures-related party		31,961			30,829
	Other		2,850			2,835
	Credit agreements:
	Primary lender-related party		500			500
	Notes payable		1,198			1,198
	Subordinated convertible debentures payable		9,059			9,059
	Convertible debentures payable-related party		1,500			1,500
			66,381			64,934
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		(80,972	)		(79,495	)
			(64,942	)		(63,465	)
		$	1,439		$	1,469

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
	March 31,			March 31,
	2012			2011
REVENUES
Real estate sales	$	-		$	16
Interest income-related party		8			10
		8			26
COSTS AND EXPENSES
Cost of real estate sales	$	-		$	1
Interest		309			301
Interest-related party		1,142			997
Taxes and assessments		2			2
Consulting and accounting-
related party		10			10
Legal and professional		4			2
General and administrative		18			16
		1,485			1,329
NET LOSS	$	(1,477	)	$	(1,303	)
NET LOSS PER SHARE (*)
AVAILABLE TO COMMON
STOCKHOLDERS-Basic and diluted	$	(.31	)	$	(.28	)

* Considers the effect of cumulative preferred dividends in arrears for the three months ended March 31, 2012 and 2011.

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)

	Three Months Ended
	March 31,			March 31,
	2012			2011
Net cash used in operating activities	$	(26	)	$	(11	)
Cash flows from investing activities:
Proceeds from notes receivable-related party		26			11
Net cash provided by investing activities		26			11
Net change in cash		-			-
Cash at beginning of period		1			1
Cash at end of period	$	1		$	1

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, 2011.

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 2011 filed with the Securities and Exchange Commission.

The condensed consolidated balance sheet as of December 31, 2011 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, 2011, 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 three months ended March 31, 2012 are not necessarily indicative of operations to be expected for the fiscal year ending December 31, 2012 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 and common stock equivalents outstanding.  The average number of common shares outstanding for the three months ended March 31, 2012 and 2011 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 months ended March 31, 2012 and 2011, 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 months ended March 31, 2012 and 2011.

	Three Months Ended
	March 31, 2012			March 31, 2011
Net Loss	$	(1,477,000	)	$	(1,303,000	)
Preferred Dividends		(160,000	)		(160,000	)
Loss Available to Common Shareholders	$	(1,637,000	)	$	(1,463,000	)
Weighted Average Number Of Common Shares Outstanding		5,317,758			5,317,758
Basic and Diluted Loss Per Share	$	(.31	)	$	(.28	)

(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 three-month periods ended March 31, 2012 and March 31, 2011.

(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:

	March 31,		December 31,
	2012		2011
	($ in thousands)
Notes receivable – related party	$	604	$	630
Interest receivable – related party		1		1
	$	605	$	631

(6) Land and Improvements

Land and improvement inventories consisted of:

	March 31,		December 31,
	2012		2011
	($ in thousands)
Unimproved land	$	625	$	625
Fully improved land		14		14
	$	639	$	639

(7) Other Assets

Other assets consisted of:

	March 31,		December 31,
	2012		2011
	($ in thousands)
Deposit with Trustee of 6-1/2% debentures	$	184	$	184
Prepaid expenses		2		4
Deferred charges		3		5
	$	189	$	193

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:

	March 31,		December 31,
	2012		2011
	($ in thousands)
Accounts payable	$	22	$	9
Accrued audit & professional		25		36
Accrued consulting fees-related party		1		1
Environmental remediation obligations		70		70
Accrued miscellaneous		2		2
	$	120	$	118
Accrued real estate taxes consisted of:
Current real estate taxes	$	2	$	8

 (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:

	March 31,		December 31,
	2012		2011
	($ in thousands)
Credit agreements – primary lender- related party:
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-
related party:
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

9

PGI INCORPORATED AND SUBSIDIARIES

Notes to Condensed Consolidated Financial Statements (continued)

(10) Income Taxes

At December 31, 2011, the Company had an operating loss carryforward of approximately $44,478,000 available to reduce future taxable income.  These operating losses expire at various dates through 2031.

The following summarizes the temporary differences of the Company at March 31, 2012 and December 31, 2011 at the current statutory rate:

	March 31,			December 31,
	2012			2011
	($ in thousands)
Deferred tax asset:
Net operating loss carry forward	$	17,463		$	16,902
Adjustments to reduce land to net realizable value		12			12
Expenses capitalized under IRC 263(a)		56			56
Environmental liability		27			27
Valuation allowance		(17,386	)		(16,825	)
		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 March 31, 2012 and December 31, 2011 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 March 31, 2012, 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 first three months of 2012 decreased by $18,000 to $8,000 from $26,000 for the comparable 2011 period primarily as a result of no real estate sales revenue in 2012 as compared to $16,000 in real estate revenue generated from the sale of a single family lot in the first quarter of 2011.  In addition, there was a $2,000 decrease in interest income due to a lower balance on the short-term note receivable with Love Investment Company (“LIC”), an affiliate of L-PGI, the Company’s primary preferred stock shareholder.    Expenses for the three month period ended March 31, 2012 increased by $156,000 when compared to the same period in 2011 primarily resulting from an increase in interest expense of $153,000 due to interest accruing on higher past due balances under the various credit agreements, notes payable and debentures which increased over the same period in 2011 for accrued but unpaid interest.  As a result, a net loss of $1,477,000 was incurred for the first three months of 2012 compared to a net loss of $1,303,000 for the first three months of 2011.  After consideration of cumulative preferred dividends in arrears, totaling $160,000 for each of the three months ended March 31, 2012 and 2011, a net loss per share of $(.31) and $(.28) was reported for the three month periods ended March 31, 2012 and 2011, respectively.  The total cumulative preferred dividends in arrears through March 31, 2012 is $10,835,000.

There were no sales of real estate in the first quarter of 2012.  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.

Interest expense during the first quarter of 2012 increased by $153,000 when compared to the same quarter for 2011 as 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.

11

PGI INCORPORATED AND SUBSIDIARIES

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

As of March 31, 2012, the Company remained in default of its primary lender indebtedness with PGIP, LLC (“PGIP”) of $500,000, an entity related to L-PGI, as well as under its subordinated and convertible debentures and its 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 March 31, 2012 and December 31, 2011. The Company did not utilize any of the restricted escrow funds during the first quarter of 2012 or 2011.

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 three month period ended March 31, 2012, the Company’s net cash used in operating activities was $26,000 compared to $11,000 for the comparable 2011 period.  Net cash provided from investing activities during the three months ended March 31, 2012 and March 31, 2011 consisted of $26,000 and $11,000, respectively, in note receivable proceeds received from LIC.  The Company receives proceeds from its notes receivable from LIC as needed to fund operating activities.

Analysis of Financial Condition

Total assets decreased by $30,000 at March 31, 2012 compared to total assets at December 31, 2011, reflecting the following changes:

	March 31,		December 31,		Increase
	2012		2011		(Decrease)
	($ in thousands)
Cash and cash equivalents	$	1	$	1	$	-
Restricted cash		5		5		-
Receivables-related party		605		631		(26	)
Land and improvement inventories		639		639		-
Other assets		189		193		(4	)
	$	1,439	$	1,469	$	(30	)

During the three month period ended March 31, 2012, the amount of receivables decreased by $26,000 due to the Company’s receipt of principal and interest payments from LIC , a related party, under the note receivable from LIC, and the amount of the other assets decreased by $4,000 due to deferred expenses utilized for services relating to 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 $66.4 million at March 31, 2012 compared to approximately $64.9 million at December 31, 2011, reflecting the following changes:

	March 31,		December 31,		Increase
	2012		2011		(Decrease)
	($ in thousands)
Accounts payable & accrued expenses	$	120	$	118	$	2
Accrued real estate taxes		2		8		(6	)
Accrued interest		54,002		52,551		1,451
Credit agreements – primary lender-
related party		500		500		-
Notes payable		1,198		1,198		-
Subordinated convertible
debentures payable		9,059		9,059		-
Convertible debentures payable-related
party		1,500		1,500		-
	$	66,381	$	64,934	$	1,447

Accrued interest increased during the three month period ended March 31, 2012 by $1.451 million due to the amount of interest expense for such period.  During the three month periods ended March 31, 2012 and March 31, 2011, the Company made no interest payments on its various credit agreements, notes payable and debentures.

The Company remains totally dependent upon the sale of parcels of its various properties to fund its operations and with respect to its ability to make any future debt service payments.  The Company also receives principal repayment and interest proceeds from its note receivable due from LIC, a related party, 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:

	March 31, 2012
	Principal		Accrued
	Amount Due		Interest
Subordinated convertible debentures:	($ in thousands)
At 6 ½%, due June 1, 1991	$	1,034	$	1,559
At 6%, due May 1, 1992		8,025		17,339
	$	9,059	$	18,898
Collateralized convertible debentures:
At 14%, due July 8, 1997	$	1,500	$	31,961
Notes Payable:
At prime plus 2%	$	1,176	$	2,850
Non-interest bearing		22		-
	$	1,198	$	2,850

13

PGI INCORPORATED AND SUBSIDIARIES

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

Primary Lender-related party: $ 500 $ 293

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, 2011.

 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 March 31, 2012.  There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2012 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 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 I 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: May 14, 2012	/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                                                                                                                     May 14, 2012

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                                                                                                                      May 14, 2012

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 March 31, 2012 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)                                                                                                  May 14, 2012

*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 March 31, 2012 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)                                                                                                       May 14, 2012

*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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Restricted Cash

3 Months Ended

Mar. 31, 2012

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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Statement of Cash Flows

3 Months Ended

Mar. 31, 2012

Statement of Cash Flows

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 three-month periods ended March 31, 2012 and March 31, 2011.

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CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION(Unaudited) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
ASSETS
Cash	$ 1	$ 1
Restricted cash	5	5
Receivables-related party	605	631
Land and improvement inventories	639	639
Other assets	189	193
Total Assets	1,439	1,469
LIABILITIES
Accounts payable and accrued expenses	120	118
Accrued real estate taxes	2	8
Accrued Interest:
Primary lender-related party	293	282
Subordinated convertible debentures	18,898	18,605
Convertible debentures-related party	31,961	30,829
Other	2,850	2,835
Credit Agreements
Primary lender-related party	500	500
Notes payable	1,198	1,198
Subordinated convertible debentures payable	9,059	9,059
Convertible debentures payable-related party	1,500	1,500
Liabilities Total	66,381	64,934
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	(80,972)	(79,495)
Total stockholders' deficiency	(64,942)	(63,465)
Total liabilities and stockholders' deficiency	$ 1,439	$ 1,469

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Basis of Presentation

3 Months Ended

Mar. 31, 2012

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, 2011.

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 2011 filed with the Securities and Exchange Commission.

The condensed consolidated balance sheet as of December 31, 2011 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, 2011, 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 three months ended March 31, 2012 are not necessarily indicative of operations to be expected for the fiscal year ending December 31, 2012 or any other interim period.

.

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Per Share Data

3 Months Ended

Mar. 31, 2012

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 and common stock equivalents outstanding.  The average number of common shares outstanding for the three months ended March 31, 2012 and 2011 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 months ended March 31, 2012 and 2011, 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 months ended March 31, 2012 and 2011.

	Three Months Ended
	March 31, 2012			March 31, 2011
Net Loss	$	(1,477,000	)	$	(1,303,000	)
Preferred Dividends		(160,000	)		(160,000	)
Loss Available to Common Shareholders	$	(1,637,000	)	$	(1,463,000	)
Weighted Average Number Of Common Shares Outstanding		5,317,758			5,317,758
Basic and Diluted Loss  Per Share	$	(.31	)	$	(.28	)

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CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION (Unaudited) (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Mar. 31, 2012	Dec. 31, 2011
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)	$ 8,000,000	$ 8,000,000
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
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

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Document and Entity Information	3 Months Ended
	Mar. 31, 2012	May 14, 2012
Document and Entity Information [Abstract]
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	2012
Document Fiscal Period Focus	Q1
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Mar. 31, 2012

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CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Revenues:
Real estate sales	$ 0	$ 16
Interest income-related party	8	10
Total Revenues	8	26
Cost and expenses:
Cost of real estate sales	0	1
Interest	309	301
Interest-related party	1,142	997
Taxes and assessments	2	2
Consulting and accounting - related party	10	10
Legal and professional	4	2
General and administrative	18	16
Total costs and expenses	1,485	1,329
Net Loss	$ (1,477)	$ (1,303)
AVAILABLE TO COMMON STOCKHOLDERS-Basic and diluted (in dollars per share)	$ (0.31)	$ (0.28)

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Other Assets

3 Months Ended

Mar. 31, 2012

Other Assets [Abstract]

Other Assets

7)             Other Assets

Other assets consisted of:
	March 31,		December 31,
	2012		2011
	($ in thousands)
Deposit with Trustee of 6-1/2% debentures	$	184	$	184
Prepaid expenses		2		4
Deferred charges		3		5
	$	189	$	193

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Land and Improvements

3 Months Ended

Mar. 31, 2012

Land and Improvements [Abstract]

Land and Improvements

(6)           Land and Improvements

Land and improvement inventories consisted of:
	March 31,		December 31,
	2012		2011
	($ in thousands)
Unimproved land	$	625	$	625
Fully improved land		14		14
	$	639	$	639

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Income Taxes

3 Months Ended

Mar. 31, 2012

Income Taxes [Abstract]

Income Taxes

(10) Income Taxes

At December 31, 2011, the Company had an operating loss carryforward of approximately $44,478,000 available to reduce future taxable income.  These operating losses expire at various dates through 2031.

The following summarizes the temporary differences of the Company at March 31, 2012 and December 31, 2011 at the current statutory rate:

	March 31,			December 31,
	2012			2011
	($ in thousands)
Deferred tax asset:
Net operating loss carry forward	$	17,463		$	16,902
Adjustments to reduce land to net realizable value		12			12
Expenses capitalized under IRC 263(a)		56			56
Environmental liability		27			27
Valuation allowance		(17,386	)		(16,825	)
		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

3 Months Ended

Mar. 31, 2012

Accounts Payable and Accrued Expenses [Abstract]

Accounts Payable and Accrued Expenses

(8)           Accounts Payable and Accrued Expenses

Accounts payable and accrued expenses consisted of:

	March 31,		December 31,
	2012		2011
	($ in thousands)
Accounts payable	$	22	$	9
Accrued audit & professional		25		36
Accrued consulting fees-related party		1		1
Environmental remediation obligations		70		70
Accrued miscellaneous		2		2
	$	120	$	118
Accrued real estate taxes consisted of:
Current real estate taxes	$	2	$	8

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

3 Months Ended

Mar. 31, 2012

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:

	March 31,		December 31,
	2012		2011
	($ in thousands)
Credit agreements - primary lender- related party:
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- related party:
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

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Fair Value of Financial Instruments

3 Months Ended

Mar. 31, 2012

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 March 31, 2012 and December 31, 2011 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 CASH FLOWS (Unaudited) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2012	Mar. 31, 2011
Cash flows from operating activities:
Net cash flow used in operating activities	$ (26)	$ (11)
Cash flows from investing activities:
Proceeds from notes receivable-related party	26	11
Net cash provided by investing activities	26	11
Net change in cash	0	0
Cash at beginning of period	1	1
Cash at end of period	$ 1	$ 1

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Receivables

3 Months Ended

Mar. 31, 2012

Receivables [Abstract]

Receivables

(5)           Receivables

Net receivables consisted of:
	March 31,		December 31,
	2012		2011
	($ in thousands)
Notes receivable - related party	$	604	$	630
Interest receivable - related party		1		1
	$	605	$	631