UNITED STATES
                     SECURITIES AND EXCHANGE COMMISSION
                           Washington, D. C. 20549

                                 FORM 10-KSB

(Mark One)
(X)      ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
         EXCHANGE ACT OF 1934

         For the fiscal year ended            December 31, 2005
                                   -------------------------------------------

( )      TRANSITION REPORT PURSUANT TO 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
------------------------------------------------------------------------------
               (Name of small business issuer in its charter)

            Florida                                        59-0867335
------------------------------------------------------------------------------
(State or other jurisdiction of                     (IRS Employer Ident. No.)
 incorporation or organization)

212 S. Central, Suite 100           St. Louis, Missouri           63105
------------------------------------------------------------------------------
        (Address of principal executive offices)               (Zip Code)

Issuer's Telephone Number, including area code:        (314)512-8650
                                               -------------------------------

Securities registered pursuant to Section 12 (b) of the Exchange Act:  None

Securities registered pursuant to Section 12 (g) of the Exchange Act:

Common Stock, Par Value $.10 per share
6% Convertible Subordinated Debentures due 1992
6.5% Convertible Subordinated Debentures due 1991

         Check whether the issuer is not required to file reports pursuant to
Section 13 or 15(d) of the Exchange Act. [ ]

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

         Check if there is no disclosure of delinquent filers in response to
Item 405 of Regulation S-B contained in this form, and no disclosure will be
contained, to the best of the registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB.(x)

         Indicate by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the Exchange Act)
                                Yes   X  No
                            ---      ---

         State the issuer's revenues for its most recent fiscal year: $467,000.
                                                                      --------

         The aggregate market value of voting stock held by non-affiliates
of the registrant cannot be determined. See Item 5 of Form 10-KSB.

         State the number of shares outstanding of each of the Issuer's
classes of common equity as of the last practicable date:

         As of March 31, 2006, 5,317,758 shares of Common Stock, par value
         -----------------------------------------------------------------
$.10 per share were outstanding.
-------------------------------






                      PGI INCORPORATED AND SUBSIDIARIES
                            FORM 10 - KSB - 2005
                     Contents and Cross Reference Index

Part  Item                                                         Form 10-KSB
No.   No.   Description                                              Page No.
---   ---   -----------                                              --------

I     1     Description of Business
              General...................................................3
              Recent Developments.......................................3

      2     Description of Property.....................................4

      3     Legal Proceedings...........................................4

      4     Submission of Matters to a Vote of Security Holders.........4

II    5     Market for Common Equity, Related Stockholder Matters and
              Small Business Issuer Purchases of Equity Securities......5

      6     Management's Discussion and Analysis or Plan of Operation...5

      7     Financial Statements.......................................12

      8     Changes in and Disagreements with Accountants on
              Accounting and Financial Disclosure......................30

      8A    Controls and Procedures....................................30

      8B    Other Information .........................................30

III   9     Directors, Executive Officers, Promoters and Control
              Persons; Compliance with Section 16(a) of the
              Exchange Act.............................................31

      10    Executive Compensation.....................................32

      11    Security Ownership of Certain Beneficial Owners and
              Management and Related Stockholder Matters...............32

      12    Certain Relationships and Related Transactions.............33

      13    Exhibits...................................................36

      14    Principal Accountant Fees and Services.....................36

Signatures.............................................................37

Exhibit Index..........................................................38



                                     2




                                   PART I
                                   ------

Item 1.  Description of Business
-------  -----------------------

GENERAL

         As used in this Annual Report on Form 10-KSB, the "Company" refers,
unless the context otherwise requires, to PGI Incorporated and its
subsidiaries. The Company's executive offices are at 212 S. Central, Suite
100, St. Louis, Missouri, 63105, and its telephone number is (314) 512-8650.

         The Company, a Florida corporation, was founded in 1958, and up
until the mid 1990's was in the business of building and selling homes,
developing and selling home sites and selling undeveloped or partially
developed tracts of land. Over approximately the last 10 years, the
Company's business focus and emphasis changed substantially as it
concentrated its sales and marketing efforts almost exclusively on the
disposition of its remaining real estate. This change was prompted by its
continuing financial difficulties due to the principal and interest owed on
its debt.

         Presently, the most valuable remaining asset is a parcel of 366
acres located in Hernando County, Florida. The Company also owns a number of
scattered sites in Charlotte County, Florida (the "Charlotte Property"), but
most of these are subject to easements which markedly reduce their value
and/or consist of wetlands of indeterminate value. As of December 31, 2005,
the Company owned seven single family lots, located in Citrus County,
Florida.

         As of December 31, 2005, the Company had no employees, and all
services provided to the Company are through contract services.

RECENT DEVELOPMENTS

         The principal remaining real property asset of the Company is a 366
acre undeveloped parcel in Hernando County, Florida, which property is
encumbered by secured creditor claims. An appraisal dated April 2, 2002 was
performed by the appraisal firm Gillis and Associates, and they reached a
conclusion that the value of this property was $8,000 per acre, and hence
$2,928,000 for the parcel.

         External circumstances make it difficult to forecast the timing or
ultimate use of this 366 acre property. Principal among the external factors
is that the property is at the present northern termination of the Suncoast
Expressway. Planning continues for the proposed northward continuation of
the Suncoast Expressway, with the most actively considered routes each
predicated on taking part of the subject property. Until and unless the
uncertainty regarding the future expansion of the Suncoast Expressway is
resolved, planning with respect to this property is difficult.

         In 2005 the Company foreclosed on ten lots and received proceeds of
$154,000 for delinquent receivables.

                                     3




Item 2.  Description of Property
-------  -----------------------

         The primary asset of the Company is a 366 acre tract of vacant land
in Hernando County, Florida. The present zoning, and hence the presently
proposed use, is for single family residential lot development. Several
factors suggest that this originally planned use may be inappropriate and/or
not the best use given present circumstances.

         Foremost among these factors is that the Suncoast Expressway may be
extended to the north. Such an extension is almost certain to impact the
property, since the probable routes as presently proposed would require a
significant part of the tract. Additional factors include the present lack
of water and sewers on the site, as well as the lack of roads on the site.
Also, about forty acres of the property have been designated in the Hernando
County's future land use plan for commercial use rather than single family
use. Finally, market demand appears to be shifting away from lots with
greenways as originally contemplated in favor of larger estate type lots
and/or higher density condo/townhouse development.

         The Company is presently studying the possible use of the land, but
the possible extension of the Suncoast Expressway makes this difficult and
the timing of any potential development is uncertain at this time. Other
vacant parcels, which could be competitive do exist in the immediate area,
most of which do not suffer the same planning constraint concerning the
possible extension of the Suncoast Expressway.

         The property is encumbered by mortgages granted by the Company in
connection with the primary lender debt of $505,000 in principal and accrued
interest and the convertible debentures held by Love 1989 Florida Partners,
L.P. which total $7,578,000 in principal and accrued interest at December
31, 2005. The primary lender debt and convertible debentures are past due
(See Notes 9 and 11 to the Consolidated Financial Statements under Item 7).

         The next largest group of real property owned by the Company
consists of scattered sites in Charlotte County. Substantially all such
holdings, however, consist of property that is subject to development
restrictions occasioned by being seriously impacted by wetlands. The
potential purchaser market for such properties is extremely limited.

         The Company believes the properties are adequately covered by
insurance.

Item 3.  Legal Proceedings
-------  -----------------

         The Company is party to lawsuits in the normal course of its
business. Presently, the Company is party to litigation in which the Company
seeks damages resulting from the installation of a high pressure gas
pipeline very near the western boundary of the 366 acre parcel owned by the
Company in Hernando County, Florida. The Company does not believe that the
resolution of this suit will have a material effect on its financial
position. (See also Note 15 to the Consolidated Financial Statements under
Item 7.)

Item 4.  Submission of Matters to a Vote of Security Holders
-------  ---------------------------------------------------

         A shareholders meeting was not held during the fiscal year ended
December 31, 2005.


                                     4




                                   PART II

Item 5.  Market for Common Equity, Related Stockholder Matters and
-------  ----------------------------------------------------------
         Small Business Issuer Purchases of Equity Securities.
         -----------------------------------------------------

         There is no public trading market for the Company's common equity
securities. There have been no reported transactions in the Company's common
stock, par value $.10 (the "Common Stock"), since January 29, 1991, with the
exception of the odd lot tender offer by PGIP, LLC, an affiliate of the
Company, in 2003 described previously in the Company's annual report on Form
10-KSB for the fiscal year ended December 31, 2004. No dividends have ever
been paid on the Common Stock, and payment of dividends is restricted under
the terms of the two indentures pursuant to which the Company's outstanding
debentures are issued. As of December 31, 2005 there were 607 holders of
record of the Company's Common Stock and approximately 445 debenture
holders.

Item 6.  Management's Discussion and Analysis or Plan of Operation
-------  ---------------------------------------------------------

PRELIMINARY NOTE

         Because the liabilities of the Company far exceed the reported
value of its assets, the most important information and analysis concerns
the nature and probable actions of the major holders of the Company's debt.
Foremost among these are the Company's 6.5% subordinated convertible
debentures, which matured June, 1991, with an original face amount of
$1,034,000, and its 6.0% subordinated convertible debentures which matured
May, 1992, with an original face amount of $8,025,000.

         The cumulative amount due for these two issues is as follows:

                                                               12/31/2005
                                                         Principal     Unpaid
                                                         Amount Due   Interest
                                                         ----------   --------
                                                            ($ in thousands)

         Subordinated debentures due June 1, 1991         $ 1,034     $  1,112
         Subordinated debentures due May 1, 1992            8,025       10,981
                                                          -------     --------
                                                          $ 9,059     $ 12,093
                                                          =======     ========

         Both issues have been in payment default for over ten years, and
there has been little contact with or on behalf of the bondholders over the
past several years. It is unclear whether any action on behalf of the
bondholders is presently likely, given the negative net worth of the Company
and continuing passage of time. Further, the Company believes that at least
a portion of such claims might be barred under the applicable statutes of
limitations.

         If such claims are barred, it is possible that the Company would
potentially have to record net income in like amount, without the receipt of
any cash, and could potentially incur a large tax liability. Any such
potential tax liability might be averted and/or mitigated, however, by the
utilization of the Company's tax loss carryforwards, which as of December
31, 2005 totaled approximately $38,000,000.

                                     5




Item 6.  Management's Discussion and Analysis or Plan of Operation (continued)
-------  ---------------------------------------------------------------------

         Even if claims by the subordinated convertible debenture holders
are barred in full and there is no cash tax consequence to the Company as a
result of the utilization of the tax loss carry forwards, the Company would
nonetheless have a substantial Stockholder's Deficiency.

         Similar defenses would not appear to apply to other creditors of
the Company, and the credit agreements with the Company's Primary Lender and
with the holder of its secured Convertible Debentures are secured by
mortgages and security interests in assets of the Company.

         Therefore, the Company's major effort and activities have been, and
continue to be, to liquidate assets of the Company to pay the ordinary
on-going costs of operation of the Company, with any large surplus expected
to be used to reduce the balance due to the Primary Lender (or to the holder
of the secured Convertible Debentures, as required should the asset sale
include their collateral).

         As the Company continues to try to sell its assets, it attempts to
realize full market value for each such asset, which may be at substantial
variance from its present carrying value. However, the major assets of the
Company that remain are both difficult to value and difficult to sell.
Certain of these assets may be of so little value and marketability that the
Company may elect not to pay the real estate taxes on selected parcels,
which may eventually result in a defacto liquidation of such property by
subjecting such property to a tax sale.

         Generally, the Company intends to continue to emphasize the
liquidation of as many assets as is possible and to use the proceeds to fund
the normal cost of operations of the Company and/or to satisfy the
requirements of the Company's secured creditors.


                                     6




Item 6.  Management's Discussion and Analysis or Plan of Operation (continued)
-------  ---------------------------------------------------------------------


RESULTS OF OPERATIONS

         Revenues for the year ended December 31, 2005 decreased by $252,000
to $467,000 compared to revenues of $719,000 for the year ended December 31,
2004 primarily reflecting decreased real estate sales revenue of $459,000,
offset by an increase in other income of $189,000 resulting from recoveries
of contracts receivable which had been fully provided for cancellation. The
net loss was $2,637,000 ($.62 per share) for 2005 compared to a net loss of
$2,183,000 ($.53 per share) for 2004. Included in the 2005 and 2004 earnings
per share computation is $640,000 ($.19 per share of Common Stock) of annual
cumulative preferred stock dividends in arrears.

Costs and Expenses
------------------

         Expenses for the years 2005 and 2004 were:

                                              2005           2004
                                              ----           ----

         Taxes and Assessments              $11,000        $35,000
         Consulting and Accounting           41,000         40,000
         Legal and Professional              21,000         37,000
         General and Administrative          50,000         41,000

         Taxes and assessments decreased by $24,000 in 2005 as a result of
the reversal of accrued taxes on lots for which foreclosure was completed in
2005 by sale for delinquent receivables. Legal and professional expenses
decreased in 2005 as a result the Company's decision in early 2005 not to
continue the litigation related to the denial of the agricultural exemption
on the undeveloped Sugarmill Woods property in Citrus County for tax year
1997 (as previously reported in the Company's form 10-QSB for quarter ended
March 31, 2005).

Interest expense for the two years ended December 31, 2005 and 2004 was:

                                              2005           2004
                                              ----           ----
                                                ($ in thousands)
         Interest Expense                    $2,957         $2,676

         Interest expense in 2005 increased by $281,000 compared to 2004 as
a result of (i) interest accruing on past due balances which increase at
various intervals throughout the year for accrued but unpaid interest, and
(ii) an increase in interest rates during 2005.


                                     7





Item 6.  Management's Discussion and Analysis or Plan of Operations (continued)
-------  ----------------------------------------------------------------------

FINANCIAL CONDITION

         Assets increased at December 31, 2005 compared to assets at
December 31, 2004 reflecting the following changes:

                                                                     Increase
                                    2005              2004          (Decrease)
                                    ----              ----          ----------
                                        ($ in thousands)
Cash and Cash Equivalents          $  147            $  201            (54)
Restricted Cash                       255               252              3
Receivables                           633               368            265
Land and Improvement                  637               637              -
Other Assets                          178               181             (3)
                                   ------            ------            ---
                                   $1,850            $1,639            211
                                   ======            ======            ===

         Cash decreased by $54,000 to $147,000 at December 31, 2005 compared
to $201,000 at December 31, 2004. Net cash provided by operations was
$212,000 for the year ended December 31, 2005 compared to net cash provided
by operations of $418,000 for the year ended December 31, 2004. Net cash
provided by operations consists of cash received from operations and cash
expended for operations.

         Cash received from operations during 2005 was $462,000, a $270,000
decrease from cash received during 2004.

         Cash expended for operations decreased by $64,000 to $250,000
during 2005 from $314,000 in 2004, reflecting decreases in the following
classifications; real estate operations ($10,000), interest payments
($5,000), taxes and assessments ($13,000), consulting and accounting
($6,000), and legal and professional ($31,000), and an increase in general
and administrative ($1,000).

         During 2005, investing activities utilized $266,000 of cash which
consisted of a $260,000 investment in a short-term note with Love Investment
Company an affiliate of L-PGI, the Company's preferred shareholder, and
$6,000 in expenditures relating to inventory and deferred expenditures. The
$260,000 short-term note with Love Investment Company is the primary reason
for the increase of $265,000 in the Company's receivables as of December 31,
2005 from December 31, 2004.

         During 2004, $267,000 of cash was used by the Company in investing
activities which included $17,000 in purchases of inventory and deferred
expenditures and $250,000 as a payment into the restricted escrow funds. The
$200,000 of cash used in financing activities in 2004 consisted of a
principal payment on the primary lender debt.

         Liabilities were approximately $39,700,000 at December 31, 2005
compared to approximately $36,900,000 at December 31, 2004, reflecting the
following changes:


                                     8




Item 6.  Management's Discussion and Analysis or Plan of Operation (continued)
-------  ---------------------------------------------------------------------



                                                                      Increase
                                            2005         2004        (Decrease)
                                            ----         ----        ----------
                                             ($ in thousands)
Accounts payable and accrued expenses     $    49       $    49        $     -
Accrued real estate taxes                     312           363            (51)
Deferred Credits                                -             3             (3)
Accrued interest                           27,088        24,186         2, 902
Credit agreements - primary
  lender                                      500           500              -
Notes payable                               1,198         1,198              -

Convertible subordinated
  debentures payable                        9,059         9,059              -
Convertible debentures payable              1,500         1,500              -
                                          -------       -------         ------
                                          $39,706       $36,858         $2,848
                                          =======       =======         ======

         The $2,902,000 increase in accrued interest at December 31, 2005
compared to year-end 2004 reflects changes in the following:

                                                                      Increase
                                            2005          2004       (Decrease)
                                            ----          ----       ----------
                                             ($ in thousands)
Primary Lender                            $     5       $     4        $    1
Debentures                                 24,752        21,948         2,804
Other                                       2,331         2,234            97
                                          -------       -------        ------
                                          $27,088       $24,186        $2,902
                                          =======       =======        ======

         The accrued interest relating to debentures increased due to the
nonpayment of interest on the Company's debentures (see Notes 10 and 11 to
the consolidated financial statements under Item 7).

         The Company's accumulated capital deficiency increased to
$37,856,000 at December 31, 2005 from a $35,219,000 accumulated capital
deficiency at December 31, 2004, reflecting the 2005 operating loss.

                                     9




New Accounting Standards
------------------------

         In March 2006, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 156,
"Accounting for Servicing of Financial Assets, an amendment of FASB
Statement No. 140". SFAS No. 156 will become effective for fiscal years
beginning after September 15, 2006. SFAS No. 156 requires an entity to
recognize a servicing asset or servicing liability at fair value, if
possible, each time it undertakes an obligation to service a financial asset
by entering into a servicing contract under certain conditions. Management
has determined that the implementation of SFAS No. 156 will not have an
effect on the Company's financial statements.

         In February 2006, the FASB issued SFAS No. 155, "Accounting for
Certain Hybrid Financial Instruments, an amendment of FASB Statements No.
133 and 140" effective for all financial instruments acquired or issued
after the beginning of an entity's first fiscal year that begins after
September 15, 2006. Management has determined that the implementation of
SFAS No. 155 will not have an effect on the Company's financial statements.

         In June 2005, the FASB issued SFAS No. 154, "Accounting Changes and
Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement
No. 3." SFAS No. 154 will become effective for accounting changes and
corrections of errors made in fiscal year 2006 and beyond. The effect of
this statement on the Company's financial statements will depend on the
nature and significance of future accounting changes subject to this
statement.

         In March 2005, the FASB issued FASB Interpretation ("FIN") No. 47,
"Accounting for Conditional Asset Retirement Obligations, an interpretation
of FASB Statement No. 143" (FIN 47). FIN 47 describes how conditional asset
retirement obligations meet the definition of liabilities and should be
recognized when incurred if their fair values can be reasonably estimated.
Management has determined that the implementation of FIN 47 did not have an
effect on the Company's financial statements.

         In December 2004, the FASB issued Statement SFAS No. 153,
"Exchanges of Nonmonetary Assets, an amendment of APB Opinion No. 29"
effective for nonmonetary asset exchanges occurring in the fiscal year
beginning January 1, 2006. SFAS No. 153 requires that exchanges of
productive assets be accounted for at fair value unless fair value cannot be
reasonably determined or the transaction lacks commercial substance.
Management has determined that the implementation of SFAS 153 will not have
an effect on the Company's financial statements.

         In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity ("SFAS 150"). SFAS 150 establishes standards for classification and
measurement in the statement of financial position of certain financial
instruments with characteristics of both liabilities and equity. It requires
that an issuer classify a financial instrument that is within its scope as a
liability. The FASB's Staff Position 150-3 deferred indefinitely the
guidance in SFAS 150 on certain mandatorily redeemable noncontrolling
interests. Management has determined that implementation of SFAS 150 did not
have an effect on the Company's financial statements.

                                     10




         In December of 2003, the FASB issued Interpretation No. 46R,
Consolidation of Variable Interest Entities, an Interpretation of Accounting
Research Bulletin No 51. The Interpretation requires the consolidation of
entities in which an enterprise absorbs a majority of the entity's expected
losses, receives a majority of the entity's expected residual returns, or
both, as a result of ownership, contractual or other financial interests in
the entity. Currently, entities are generally consolidated by an enterprise
when it has a controlling interest through ownership of a majority voting
interest in the entity. The Company has determined that it has no such
interests.

Forward Looking Statements
--------------------------

         The discussion set forth in this Item 6, as well as other portions
of this Form 10-KSB, may contain forward-looking comments. Such comments 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-KSB. When
used in this Form 10-KSB, words such as "anticipates," "estimates,"
"believes," "expects," and similar expressions are intended to identify
forward-looking statements but are not the exclusive means of identifying
such statements. Such statements are subject to risks and uncertainties.
Actual results of the Company's operations could materially differ from
those forward-looking comments. 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 convertible debentures;
continued failure by governmental authorities to make a decision with
respect to the Suncoast Expressway as described under Item 1; 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.


                                     11





Item 7.  Financial Statements
-------  --------------------
         Report of Independent Registered Public Accounting Firm
         -------------------------------------------------------

Board of Directors and Stockholders
PGI, Incorporated
St. Louis, Missouri

We have audited the accompanying consolidated statements of financial
position of PGI Incorporated and Subsidiaries as of December 31, 2005 and
2004, and the related consolidated statements of operations, stockholders'
deficiency and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.

We conducted our audits in accordance with the standards of the Public
Company Accounting Oversight Board (United States). Those standards require
that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by management,
as well as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PGI
Incorporated and Subsidiaries at December 31, 2005 and 2004, and the results
of its operations and its cash flows for the years then ended, in conformity
with accounting principles generally accepted in the United States of
America.

The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. The Company has a significant
accumulated deficit, and is in default on its primary debt (Note 9), certain
sinking fund and interest payments on its convertible subordinated
debentures (Note 10) and its convertible debentures (Note 11). These matters
raise substantial doubt about the Company's ability to continue as a going
concern. Management's plans in this regard are described in Note 10. The
financial statements do not include any adjustments that might result from
the outcome of this uncertainty.

                                         /s/ BKD, LLP
St. Louis, Missouri
March 10, 2006


                                     12






                                      PGI INCORPORATED AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                                          December 31, 2005 and 2004


                                       ASSETS                                                 LIABILITIES
                                       ======                                                 ===========
                                  2005         2004                                       2005          2004
                                  ----         ----                                       ----          ----

                                                                                 
Cash and cash equivalents   $  147,000   $  201,000     Accounts payable and      $     49,000  $     49,000
                                                        accrued expenses (Note 8)

Restricted cash (Note 3)       255,000      252,000
                                                        Accrued real estate
                                                        taxes (Note 8)                 312,000       363,000
Receivables on real
estate sales- net (Note 4)       1,000        1,000
                                                        Deferred Credits                     -         3,000

Other receivables (Note 16)    632,000      367,000     Accrued Interest:
                                                        Primary Lender                   5,000         4,000
Land and improvement                                    Debentures
inventories (Note 5)           637,000      637,000     (Notes 10 & 11)             24,752,000    21,948,000

                                                        Other (Note 10)              2,331,000     2,234,000

Other assets (Note 7)          178,000     181,000      Credit Agreements
                                                        (Note 9)
                                                        Primary Lender                 500,000       500,000
                                                        Notes payable                1,198,000     1,198,000
                                                        Subordinated convertible
                                                        debentures payable           9,059,000     9,059,000
                                                        (Note 10)

                                                        Convertible debentures
                                                        payable (Note 11)            1,500,000     1,500,000
                                                                                     ---------     ---------

                                                        Commitments and
                                                        Contingencies (Note 15)     39,706,000    36,858,000
                                                                                    ----------    ----------

                                                        STOCKHOLDERS' DEFICIENCY
                                                        ------------------------
                                                        Preferred stock,
                                                        par value $1.00 per
                                                        share; authorized
                                                        5,000,000 shares;
                                                        2,000,000 Class A
                                                        cumulative
                                                        convertible Shares
                                                        issued and outstanding;
                                                        (liquidation preference
                                                        of $8,000,000 and
                                                        cumulative dividends)
                                                        (Note 13)                    2,000,000     2,000,000

                                                        Common stock, par
                                                        value $.10 per
                                                        share; authorized
                                                        25,000,000 shares;
                                                        5,317,758 shares
                                                        issued and
                                                        outstanding
                                                        (Note 13)                      532,000       532,000
                                                        Paid-in capital             13,498,000    13,498,000

                                                        Accumulated deficit        (53,886,000)  (51,249,000)
                                                                                  ------------  ------------
                                                                                   (37,856,000)  (35,219,000)
                            ----------   ----------                               ------------  ------------
                            $1,850,000   $1,639,000                               $  1,850,000  $  1,639,000
                            ==========   ==========                               ============  ============

                         See accompanying notes to consolidated financial statements



                                     13





                           PGI INCORPORATED AND SUBSIDIARIES
                         CONSOLIDATED STATEMENTS OF OPERATIONS
                         Years ended December 31, 2005 and 2004


                                                       2005                       2004
                                                       ----                       ----
                                                                        
Revenues:
       Real estate sales (Note 2)                  $   215,000                $   674,000
       Interest income                                  55,000                     36,000
       Other income (Note 2)                           197,000                      9,000
                                                   -----------                -----------
                                                       467,000                    719,000
                                                   -----------                -----------

Costs and expenses:
       Cost of real estate sales (Note 2)               24,000                     73,000
       Interest                                      2,957,000                  2,676,000
       Taxes and assessments                            11,000                     35,000
       Consulting and accounting                        41,000                     40,000
       Legal and professional                           21,000                     37,000
       General and administrative                       50,000                     41,000
                                                   -----------                -----------
                                                     3,104,000                  2,902,000
                                                   -----------                -----------

Net (Loss)                                         $(2,637,000)               $(2,183,000)
                                                   ===========                ===========

(Loss) Per Share Available to Common
  Stockholders - Basic and Diluted (Note 18)       $      (.62)               $      (.53)
                                                   ===========                ===========


              See accompanying notes to consolidated financial statements.


                                     14






                                   PGI INCORPORATED AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 Years ended December 31, 2005 and 2004


                                                                              2005              2004
                                                                              ----              ----
                                                                                        
Cash flows from operating activities:

Cash received from operations:
      Collections from real estate sales and receivables on such sales      $ 215,000         $ 700,000
      Interest received                                                        43,000            24,000
      Other operating receipts                                                204,000             8,000
                                                                            ---------         ---------
                                                                              462,000           732,000
                                                                            ---------         ---------

Cash expended for operations:
      Payments for real estate sales                                           24,000            34,000
      Interest paid                                                            56,000            61,000
      Taxes and assessments                                                    63,000            76,000
      Consulting and accounting                                                40,000            46,000
      Legal and professional                                                   18,000            49,000
      General and administrative                                               49,000            48,000
                                                                            ---------         ---------
                                                                              250,000           314,000
                                                                            ---------         ---------

      Net cash flow provided by operating activities                          212,000           418,000
                                                                            ---------         ---------

Cash flows from investing activities:
      Investment in notes receivables                                        (260,000)                -
      Purchases of inventory and deferred expenditures                         (6,000)          (17,000)
      Payments for restricted cash                                                  -          (250,000)
                                                                            ---------         ---------
Net cash flow used in investing activities                                   (266,000)         (267,000)
                                                                            ---------         ---------

Cash flows from financing activities:
      Principal payments on debt                                                    -          (200,000)
                                                                            ---------         ---------
      Net cash flow used in financing activities                                    -          (200,000)
                                                                            ---------         ---------

Net decrease in cash and cash equivalents                                     (54,000)          (49,000)

Cash and cash equivalents at beginning of year                                201,000           250,000
                                                                            ---------         ---------
Cash and cash equivalents at end of year                                    $ 147,000         $ 201,000
                                                                            =========         =========

Non-cash investing and financing activities:
      Interest earned on restricted cash                                    $   3,000         $   1,000
                                                                            ---------         ---------

                     See accompanying notes to consolidated financial statements.



                                     15





                                   PGI INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                 Years ended December 31, 2005 and 2004


                                                                           2005                2004
                                                                           ----                ----
                                                                                      
Reconciliation of net (loss) to net cash provided by operating
 activities:

Net (loss)                                                              $(2,637,000)        $(2,183,000)

Adjustments to reconcile net (loss) to net cash (used in)
 operating activities:
         Earnings capitalized into restricted cash                           (3,000)             (1,000)

(Increase) decrease in assets:
    Other receivables                                                        (5,000)              9,000
    Land and improvement inventories-net                                      3,000              38,000
    Prepaid expenses and deposits                                             6,000              (2,000)
Increase (decrease) in liabilities:
    Accounts payable and accrued expenses                                         -             (19,000)
    Accrued real estate taxes                                               (51,000)            (39,000)
    Deferred credits                                                         (3,000)                  -
    Accrued interest                                                      2,902,000           2,615,000
                                                                        -----------         -----------

Net cash flow provided by operating activities                          $   212,000         $   418,000
                                                                        ===========         ===========

                      See accompanying notes to consolidated financial statements.


                                     16






                                           PGI INCORPORATED AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
                                         Years ended December 31, 2005 and 2004


                              Preferred Stock                Common Stock                                Retained
                              ---------------                ------------                                Earnings
                           Shares      Par Value         Shares       Par Value     Paid-In Capital      (Deficit)
                           ------      ---------         ------       ---------     ---------------      ---------


                                                                                     
Balances at 12/31/03      2,000,000    $2,000,000       5,317,758     $532,000        $13,498,000      $(49,066,000)

Net Loss                          -             -               -            -                  -        (2,183,000)
                          ---------    ----------       ---------     --------        -----------      ------------
Balances at 12/31/04      2,000,000    $2,000,000       5,317,758     $532,000        $13,498,000      $(51,249,000)

Net Loss                          -             -               -            -                  -        (2,637,000)
                          ---------    ----------       ---------     --------        -----------      ------------
Balances at 12/31/05      2,000,000    $2,000,000       5,317,758     $532,000        $13,498,000      $(53,886,000)
                          =========    ==========       =========     ========        ===========      ============

                             See accompanying notes to consolidated financial statements.


                                     17





                      PGI INCORPORATED AND SUBSIDIARIES
                 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.       Significant Accounting Policies:
         --------------------------------

Principles of Consolidation
---------------------------

         The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries after eliminating all significant
inter-company transactions.

Accounting Estimates
--------------------

         The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.

Revenue and Profit Recognition
------------------------------

Homesites
---------

         The Company adopted the installment method of profit recognition in
accordance with Statement of Financial Accounting Standard No. 66
"Accounting for Sales of Real Estate".

Acreage
-------

         Sales of undeveloped and developed acreage tracts are recognized,
net of any deferred revenue and valuation discount, when minimum down
payment and other requirements are met.

Land and Improvement Inventories
--------------------------------

         Land held for sale to customers and land held for bulk sale are
stated at cost, which is not in excess of estimated net realizable value.
Homesite costs are allocated to projects based on area methods, which
consider footage, future improvements costs and frontage.

Property and Equipment
----------------------

         Property and equipment are stated at cost. Depreciation is provided
principally by the straight-line method over the estimated useful lives of
the related assets. Gains or losses resulting from the disposition of
property and equipment are respectively included in other income and other
expense.

Cash and Cash Equivalents
-------------------------

         For purposes of the statement of cash flows, the Company considers
all highly liquid debt instruments purchased with a maturity of three months
or less to be cash equivalents.



                                     18




                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)

New Accounting Standards
------------------------

         In March 2006, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 156,
"Accounting for Servicing of Financial Assets, an amendment of FASB
Statement No. 140". SFAS No. 156 will become effective for fiscal years
beginning after September 15, 2006. SFAS No. 156 requires an entity to
recognize a servicing asset or servicing liability at fair value, if
possible, each time it undertakes an obligation to service a financial asset
by entering into a servicing contract under certain conditions. Management
has determined that the implementation of SFAS No. 156 will not have an
effect on the Company's financial statements.

         In February 2006, the FASB issued SFAS No. 155, "Accounting for
Certain Hybrid Financial Instruments, an amendment of FASB Statements No.
133 and 140" effective for all financial instruments acquired or issued
after the beginning of an entity's first fiscal year that begins after
September 15, 2006. Management has determined that the implementation of
SFAS No. 155 will not have an effect on the Company's financial statements.

         In June 2005, the FASB issued SFAS No. 154, "Accounting Changes and
Error Corrections, a replacement of APB Opinion No. 20 and FASB Statement
No. 3." SFAS No. 154 will become effective for accounting changes and
corrections of errors made in fiscal year 2006 and beyond. The effect of
this statement on the Company's financial statements will depend on the
nature and significance of future accounting changes subject to this
statement.

         In March 2005, the FASB issued FASB Interpretation ("FIN") No. 47,
"Accounting for Conditional Asset Retirement Obligations, an interpretation
of FASB Statement No. 143" (FIN 47). FIN 47 describes how conditional asset
retirement obligations meet the definition of liabilities and should be
recognized when incurred if their fair values can be reasonably estimated.
Management has determined that the implementation of FIN 47 did not have an
effect on the Company's financial statements.

         In December 2004, the FASB issued SFAS No. 153, "Exchanges of
Nonmonetary Assets, an amendment of APB Opinion No. 29" effective for
nonmonetary asset exchanges occurring in the fiscal year beginning January
1, 2006. SFAS No. 153 requires that exchanges of productive assets be
accounted for at fair value unless fair value cannot be reasonably
determined or the transaction lacks commercial substance. Management has
determined that the implementation of SFAS 153 will not have an effect on
the Company's financial statements.

         In May 2003, the FASB issued SFAS No. 150, Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and
Equity ("SFAS 150"). SFAS 150 establishes standards for classification and
measurement in the statement of financial position of certain financial
instruments with characteristics of both liabilities and equity. It requires
that an issuer classify a financial instrument that is within its scope as a
liability. The FASB's Staff Position 150-3 deferred indefinitely the
guidance in SFAS 150 on certain mandatorily

                                     19




                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)

redeemable noncontrolling interests. Management has determined that
implementation of SFAS 150 did not have an effect on the Company's financial
statements.

         In December of 2003, the FASB issued Interpretation No. 46R,
Consolidation of Variable Interest Entities, an Interpretation of Accounting
Research Bulletin No 51. The Interpretation requires the consolidation of
entities in which an enterprise absorbs a majority of the entity's expected
losses, receives a majority of the entity's expected residual returns, or
both, as a result of ownership, contractual or other financial interests in
the entity. Currently, entities are generally consolidated by an enterprise
when it has a controlling interest through ownership of a majority voting
interest in the entity. The Company has determined that it has no such
interests.

2.       Real Estate Sales and Other Income:
         -----------------------------------

Real estate sales and cost of sales consisted of:

                                            2005              2004
                                            ----              ----

         Homesite/acreage sales           $215,000          $674,000
         Cost of Sales                      24,000            73,000
                                          --------          --------
         Gross Profit Margin              $191,000          $601,000
                                          ========          ========

         In the first quarter 2005, the Company completed the sale of an
         unusual real estate parcel, at the price of $175,000. This parcel
         was not carried for any value on the Company's books, inasmuch as
         it was an undevelopable thin strip of mangrove fringe. However,
         because of the height of the mangroves, the adjoining property
         owner purchased this fringe strip in order to be able to enhance
         the view amenity on his proposed developments.

         In the second quarter of 2004, the Company closed the sale of two
         unusual real estate parcels of undevelopable thin strips of mangrove
         fringe at the price of $250,000 each. These two parcels were not
         carried for value on the Company's books.

         Other income for the years 2005 and 2004 was $197,000 and $9,000,
         respectively. The other income mainly consists of recoveries of
         contracts receivable which have been fully provided for
         cancellation. In 2005, the Company foreclosed on ten lots and
         received proceeds of $154,000 for delinquent receivables.


                                     20




                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)

3.       Restricted Cash:
         ----------------

         Restricted cash includes restricted proceeds held by PGIP,LLC
("PGIP"), the Primary Lender, as collateral for debt repayment and escrowed
receipts related to sold contracts receivable. (See Note 16)

         The restricted escrow funds at December 31, 2005 and December 31,
2004 was $255,000 and $252,000 respectively. The Company restored $250,000
of the restricted escrow funds in September 2004. These escrow funds are
invested in a money market account.

4.       Receivables on Real Estate Sales:
         ---------------------------------

         Net receivables on real estate consisted of:

                                                      2005            2004
                                                      ----            ----

         Contracts receivable on homesite sales      $    -         $ 64,000
         Other                                        1,000            1,000
                                                     ------         --------
                                                     $1,000         $ 65,000
         Less:  Allowance for cancellations               -          (64,000)
                                                     ------         --------
                                                     $1,000         $  1,000
                                                     ======         ========

         In 2005, the Company completed foreclosure proceedings on the
remaining delinquent contracts receivable.

         Contracts receivable on home site sales and related receivables
were fully provided for cancellation at December 31, 2004. The Company had
been actively pursuing collection on the remainder of lots with delinquent
contacts receivable. An assessment was made for each contract receivable as
to the economic benefit of reacquisition of the lot considering the cost of
foreclosure, delinquent taxes and association fees due, and estimated
current sale value of the lot. For those with benefit, foreclosure action
was begun in the absence of payment or receipt of a quit claim deed of the
property back to the Company.


                                     21





                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)

5.       Land and Improvements:
         ----------------------
         Land and improvement inventories consisted of:

                                                     2005             2004
                                                     ----             ----

             Unimproved land                       $621,000         $621,000
             Fully improved land                     16,000           16,000
                                                   --------         --------
                                                   $637,000         $637,000
                                                   ========         ========

6.       Property and Equipment:
         -----------------------
         Property and equipment consisted of:

                                                      2005            2004
                                                      ----            ----

             Furniture, fixtures and other
                equipment                           $31,000         $ 31,000

             Less accumulated depreciation          (31,000)         (31,000)
                                                    -------         --------
                                                    $     -         $      -
                                                    =======         ========

7.       Other Assets:
         -------------
         Other assets consisted of:

                                                      2005            2004
                                                      ----            ----

             Deposit with Trustee of 6 1/2%
                debentures                         $165,000         $161,000
             Prepaid Expenses                         3,000            8,000
             Deferred Charges                        10,000           12,000
                                                   --------         --------
                                                   $178,000         $181,000
                                                   ========         ========

8.       Accounts Payable and Accrued Expenses:
         --------------------------------------
         Accounts payable and accrued
             expenses consisted of:

                                                      2005            2004
                                                      ----            ----

             Accounts payable                      $ 12,000         $ 12,000
             Accrued audit/tax expense               31,000           29,000
             Accrued consulting fees                  6,000            5,000
             Accrued legal expense                        -            1,000
             Accrued miscellaneous                        -            2,000
                                                   --------         --------
                                                   $ 49,000         $ 49,000
                                                   ========         ========

         Accrued Real Estate Taxes:
         --------------------------
         Accrued real estate taxes consisted of:
             Current                               $      -         $  5,000
             Delinquent                             312,000          358,000
                                                   --------         --------
                                                   $312,000         $363,000
                                                   ========         ========

                                     22




                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)

9.       Credit Agreements - Primary Lender and Notes Payable:
         -----------------------------------------------------
         Credit agreements with the Company's primary lender and notes payable
consisted of the following:

                                                     2005             2004
                                                     ----             ----
         Credit agreements - primary lender
         (Balance is past due, bearing interest
         at prime plus 5.0%):                     $  500,000       $  500,000

         Notes payable -
            $1,176,000 bearing interest at prime
            rate plus 2%, the remainder bearing
            interest at 12%, all past due          1,198,000        1,198,000
                                                  ----------       ----------
                                                  $1,698,000       $1,698,000
                                                  ==========       ==========

The prime rate at December 31, 2005 and 2004 was 7.25% and 5.25%
respectively.

         In September 2004, the Company made a principal payment of $200,000
to reduce the primary lender indebtedness.

         At December 31, 2005 assets collateralizing the Company's credit
agreements with its primary lender totaled $892,000, of which $255,000
represented escrow held by the primary lender, and $637,000 represented land
and improvement inventories.

         The overall weighted average interest rate for the Company's credit
agreements with its primary lender and all remaining notes and mortgages was
approximately 9% as of December 31, 2005 and 7.3% as of December 31, 2004.

         Although substantially all of the Company's real and personal
property including all of the stock of the Company's wholly-owned
subsidiaries remains pledged as collateral, the Company negotiated
agreements with its mortgage holders to allow the Company to sell part of
its land holdings without requiring full payment of the secured debt.

         Accrued interest was $2,331,00 and $2,234,000 at December 31, 2005
and 2004, respectively.

         All of the primary lender debt and notes payable are past due.

10.      Subordinated Convertible Debentures Payable:
         --------------------------------------------
         Subordinated debentures payable consisted of:

                                                     2005             2004
                                                     ----             ----
             6 1/2%, due June 1991                $1,034,000       $1,034,000
             6%, due May 1992                      8,025,000        8,025,000
                                                  ----------       ----------
                                                  $9,059,000       $9,059,000
                                                  ==========       ==========

         Since issuance, $650,000 and $152,000 of the 6 1/2% and 6%
debentures, respectively, have been converted into common stock; however,
this conversion feature is no longer in effect.


                                     23




                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)

         The Company is in default of certain sinking fund and interest
payments on both subordinated debentures totaling $9,059,000 in principal
plus accrued and unpaid interest of $12,093,000 at December 31, 2005 and
$11,110,000 as of December 31, 2004.

         The debentures are not collateralized and are not subordinated to
each other, but are subordinated to senior indebtedness ($3,198,000 at
December 31, 2005). Payment of dividends on the Company's common stock is
restricted under the terms of the two indentures pursuant to which the
outstanding debentures are issued.

         In order to meet liquidity needs for future periods, the Company
has been and intends to continue to actively seek buyers for the remaining
portion of the underdeveloped acreage, when appropriate.

         No assurances can be made that the Company can achieve this
objective.

11.      Convertible Debentures Payable:
         -------------------------------

         In July and September 1989, the Company sold $1,282,000 and
$1,000,000 respectively, of convertible debentures to a partnership
affiliated with the Company's preferred shareholder. In connection with the
July 1992 Secured Lender Transaction in partial consideration for the
conveyance of 366 acres of property, the principal amount due to convertible
debenture holders was reduced by $782,000 and accrued interest thereon was
reduced by $389,000 leaving a balance of $1,500,000. The maturity date on
all the remaining debentures was extended to July 8, 1997 so that the
debentures are in default. The past due debentures accrue interest at 14%
compounded quarterly. The Company's primary lender credit agreements,
however, prohibit the payment of interest until such time as the primary
lender loans are repaid. At maturity the Convertible Debentures purchased on
July 24, 1989, were convertible into 868,788 common shares and those
purchased on September 29, 1989, were convertible into 1,726,568 common
shares, or a total of 2,595,356 shares of common stock at an initial
conversion price of $1.72 per share. The conversion price may be adjusted
upon the occurrence of certain events. The debentures held by Love-1989
Florida Partners, L.P., are secured by a second mortgage behind PGIP, LLC on
the 366 acres retained by the Company and a security interest behind that
held by PGIP, LLC in the restricted proceeds escrow.

         Accrued interest was $12,659,000 and $10,838,000 at December 31,
2005 and 2004 respectively.


                                     24





                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)

12.      Income Taxes:
         ------------

         Reconciliation of the statutory federal income tax rates, 34% for
the years ended December 31, 2005 and 2004, to the Company's effective
income tax rates follows:



                                                2005                                      2004
                                                ----                                      ----
                                                               ($ in thousands)
                                                     Percent of                                 Percent of
                                  Amount of tax     Pre-tax Loss           Amount of Tax       Pre-tax loss
                                  -------------     ------------           --------------      ------------

                                                                                      
Expected tax (credit)                $ (897)           (34.0%)                 $(742)              (34.0%)
State income taxes, net of
  federal tax benefits                 (105)            (4.0%)                   (87)               (4.0%)
Increase in valuation allowance       1,002             38.0%                    829                38.0%
                                     ------            -----                   -----              ------
                                     $    -                -                       -                   -
                                     ======            =====                   =====              ======


         At December 31, 2005, the Company had an operating loss carry
forward of approximately $38,000,000 which will expire at various dates
through 2025.

                                                 2005                2004
                                                 ----                ----
                                                     ($ in thousands)
Deferred tax asset:
     Net operating loss carryover              $ 14,729            $ 13,727
     Adjustments to reduce land to net
       realizable value                              12                  12
     Expenses capitalized under IRC 263(a)           56                  56
     Valuation allowance                        (14,625)            (13,623)
                                               --------            --------
                                               $    172            $    172
Deferred tax liability:
     Basis difference of land and
       improvement inventories                 $    172            $    172
                                               --------            --------

Net deferred tax asset                         $      -            $      -
                                               ========            ========



                                     25




                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)

13.      Capital Stock:
         --------------

         In March 1987, the Company sold, in a private placement 1,875,000
shares of its Class A cumulative convertible preferred stock to Love-PGI
Partners, L.P. ("L-PGI") for a purchase price of $7,500,000 cash ($4.00 per
share). The Company also converted $500,000 of indebtedness owed to a
corporation owned by the Company's former Chairman of the Board of Directors
and members of his family into 125,000 shares of the cumulative convertible
preferred stock.

         The holders of the preferred stock are entitled to one vote per
share and, except as provided by law, will vote as one class with the
holders of the common stock. Class A preferred stockholders are also
entitled to receive cumulative dividends at the annual rate of $.32 per
share, an effective yield of 8%. Dividends accrued for an initial two year
period and, at the expiration of this period, preferred stockholders had the
option of receiving accumulated dividends, when and if declared by the Board
of Directors, in cash (unless prohibited by law or contract) or common
stock. At December 31, 2005 cumulative preferred dividends in arrears
totaled $6,835,000 ($640,000 of which related to the year ended December 31,
2005). On May 15, 1997 preferred dividends accrued through April 25, 1995
totaling $4,260,433 were paid in the form of 2,000,203 shares of common
stock.

         As of December 31, 2005, the preferred stock is callable or
redeemable at the option of the Company at $4.00 per share plus accrued and
unpaid dividends. In addition, the preferred stock will be entitled to
preference of $4.00 per share plus accrued and unpaid dividends in the event
of liquidation of the Company.

         At December 31, 2005 the Company had reserved 6,355,356 common
shares for the conversion of preferred stock and debentures.

14.      Quarterly Results:
         ------------------

         There were no significant transactions in the fourth quarter of 2005.


                                     26




                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)

15.      Commitments and Contingencies:
         ------------------------------

         The Company is a party to various legal proceedings incidental to
the normal operation of its business.

         One instance of litigation involves Sugarmill Woods, Inc., a wholly
owned subsidiary of PGI Incorporated, as a Plaintiff. The western boundary
of the Company's 366 acre parcel abuts a high voltage electric transmission
line. A high pressure pipeline was installed on that adjoining property
close to and parallel to the western boundary of the 366 acre parcel. The
Company filed a suit asserting that the close proximity of the high pressure
pipeline is adverse to the property value and therefore the Company seeks
compensation for such damages.

16.      Related Party Transactions:
         ---------------------------

         As of December 31, 2005 the Company was in default of its primary
credit agreements with PGIP, its Primary Lender.

         PGIP is owned and managed by Love Savings Holding Company ("LSHC"),
Andrew S. Love, Jr. and Laurence A. Schiffer. Messrs. Love and Schiffer are
directors and executive officers of LSHC and own 90% of all the issued and
outstanding voting stock of LSHC. Messrs. Love and Schiffer serve as the
executive officers and directors of the Company.

         The Company maintains its administration and accounting offices
with Love Real Estate Company ("LREC"). LREC, which is an affiliate of
L-PGI, the Company's preferred shareholder, is paid a monthly fee for the
following:

         1.  Maintain books of original entry;
         2.  Prepare quarterly and annual SEC filings;
         3.  Coordinate the annual audit;
         4.  Assemble information for tax filing, review reports as prepared
             by tax accountants and file same;
         5.  Track shareholder records through transfer agent;
         6.  Maintain policies of insurance against property and liability
             exposure;
         7.  Handle day-to-day accounting requirements

         In addition, the Company receives office space, telephone service
and computer service from LREC. A fee of $2,800 per month was paid to LREC
in 2005 and 2004.


                                     27




                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)

         Effective March 25, 1987, the Company entered into a Management
Consulting Agreement with LREC. As a consultant to the Company and in
addition to the above services, LREC provides other services including, but
not limited to, strategic planning, marketing and financing as requested by
the Company. In consideration for these consulting services, the Company
pays LREC a quarterly consulting fee of one-tenth of one percent of the
carrying value of the Company's assets, plus reasonable out-of-pocket
expenses. As of December 31, 2005, the carrying value of the Company's
assets was approximately $1,850,000. Consulting fees totaling $7,000 were
accrued during 2005 and 2004, respectively. The Company made payments of
$7,000 and $12,000 in 2005 and 2004, respectively for consulting fees. As of
December 31, 2005 and 2004, a total of $6,000 and $5,000, respectively, of
unpaid fees had accrued under this agreement.

         In 1985 a corporation owned by the former Chairman of the Board and
his family made an uncollateralized loan to the Company, which at December
31, 2005 had an outstanding balance, including accrued interest, of
$495,000. Interest accrued on this loan was $14,000 and $11,000 for the
years 2005 and 2004, respectively.

         From time to time, the Company invests in short-term debt
obligations of an affiliate of L-PGI, the Company's preferred shareholder,
Love Investment Company. The balance receivable at December 31, 2005 and
2004 was $600,000 and $340,000, respectively. Interest on the loans was
$32,000 and $27,000 for 2005 and 2004, respectively.

         In 2005 and 2004 the Company incurred expenses totaling $2,000 and
$8,000, respectively, for the services of Hallmark Senior Housing, Inc., a
related entity, to handle analysis of real estate owned and options
available.

17.      Fair Value of Financial instruments:
         ------------------------------------

         The following methods and assumptions were used to estimate the
fair value of each class of financial instrument for which it is practicable
to estimate that value:

Cash and Restricted Cash:

         The carrying amount approximates fair value because of the short
maturity of those instruments.

Debt:

         It was not practicable to estimate the fair value of the Company's
debt with its primary lender, its notes payable and its convertible
debentures because these debts are in default causing no basis for
estimating value by reference to quoted market prices or current rates
offered to the Company for debt of the same remaining maturities.


                                     28




                      PGI INCORPORATED AND SUBSIDIARIES
           Notes to Consolidated Financial Statements (continued)

Accounts Payable:

         The carrying amount approximates fair value because of the
short-term maturity of those debts. The estimated fair values of the
Company's financial instruments are as follows:

                                                   Carrying            Fair
         2005                                       Amount             Value
         ----                                       ------             -----

Cash and Restricted Cash                         $   402,000          $402,000
Other Receivables                                    633,000           633,000
Accounts Payable                                      12,000            12,000
Debt                                              12,257,000                 -

18.      (Loss) Per Share:
         -----------------

         The following is a summary of the calculations used in computing
basic and diluted (loss) per share:

                                                     2005              2004
                                                     ----              ----
Numerator:
Net (Loss)                                       $(2,637,000)      $(2,183,000)
Preferred Dividends                                 (640,000)         (640,000)
                                                 -----------       -----------
(Loss) Available to
  Common Shareholders                            $(3,277,000)      $(2,823,000)
                                                 ===========       ===========

Denominator:
BASIC
Weighted average amount of shares
         outstanding                               5,317,758         5,317,758
                                                 ===========       ===========

DILUTED
Weighted average amount of shares
         outstanding                               5,317,758         5,317,758
Dilutive effect of assumed conversion
         of Preferred Stock                                -                 -
                                                 -----------       -----------
Dilutive common shares                             5,317,758         5,317,758
                                                 ===========       ===========

(Loss) per share
         Basic                                         $(.62)            $(.53)
         Diluted                                        (.62)             (.53)


                                     29





Item 8.  Changes in and Disagreements with Accountants on Accounting and
-------  ---------------------------------------------------------------
         Financial Disclosure

         Not Applicable.

Item 8A. Controls and Procedures
         -----------------------

         The Company has evaluated the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rule
13a-15(e) of the Securities Exchange Act of 1934, as amended) under the
supervision and with the participation of the Chief Executive Officer
("CEO") and the Chief Financial Officer ("CFO") of the Company. Based on
this evaluation, the CEO and CFO concluded that the Company's disclosure
controls and procedures were effective as of December 31, 2005. There have
been no changes in the Company's internal control over financial reporting
during the Company's fourth fiscal quarter ending December 31, 2005, that
have materially affected, or are reasonably likely to materially affect, the
Company's internal control over financial reporting.

Item 8B. Other Information
         -----------------

         Not Applicable


                                     30




                                  PART III
                                  --------

Item 9.  Directors, Executive Officers, Promoters and Control Persons;
         -------------------------------------------------------------
         Compliance with Section 16(a) of the Exchange Act
         -------------------------------------------------

         The following information, regarding executive officers and
directors of the Company, is as of March 25, 2006.

                        Position with Company and Business Experience
Name and Age            During the Last Five Years
------------            ---------------------------------------------

Laurence A. Schiffer    Director of the Company since April 1987;  President
      (age 66)          and Chief Executive Officer and Chief Financial
                        Officer of the Company since February 1994; Vice
                        Chairman of the Board since May 1987; President and
                        Chief Executive Officer of Love Real Estate Company
                        and Love Investment Company since 1973; Chairman of
                        Heartland Bank and President of LSHC, the parent
                        company of Heartland Bank since December 1985;
                        Manager of PGIP since 1995;  member of the Real
                        Estate Board of Metropolitan St. Louis and the
                        National Association of Real Estate Boards.

Andrew S. Love Jr.      Director and Chairman of the Company's Board of
      (age 62)          Directors since May 1987; Secretary since February
                        1994; Chairman of the Board of Love Real Estate
                        Company and Secretary of Love Investment Company
                        since 1973; Partner in St. Louis based law firm of
                        Bryan, Cave, McPheeters & McRoberts until 1991;
                        Director of Heartland Bank and Chairman of LSHC, the
                        parent company of Heartland Bank since December 1985;
                        Manager of PGIP since 1995.

         Executive officers of the Company are appointed annually by the
Board of Directors to hold office until their successors are appointed and
qualify.

         The directors of the Company have determined that the Company does
not have an audit committee financial expert serving on its board of
directors (which acts as the Company's audit committee). In addition, the
Company has not adopted a code of ethics that applies to its principal
executive officer and principal financial officer (principal accounting
officer). The Company's decision not to adopt a code of ethics or to have an
audit committee financial expert are primarily attributable to the following
reasons: (i) as a result of its continuing financial difficulties due to
amounts owed on its debt, the Company is focused almost exclusively on the
disposition of its remaining real estate; (ii) as described in Item 5, there
have been no reported transactions in the Company's Common Stock since
January 29, 1991, other than the odd lot tender offer in 2003; (iii) the
board of directors of the Company consists of only two directors; and (iv)
the same person serves as the Company's chief executive officer and chief
financial officer.


                                     31





Item 10. Executive Compensation
-------- ----------------------

         The Company's Chief Executive Officer and Chief Financial Officer is
Mr. Laurence A. Schiffer. Because of the Company's impaired financial
condition, it does not compensate in any manner Mr. Schiffer or Mr. Love,
the Company's only other executive officer, for the services they perform
for the Company in that capacity. Management services are provided to the
Company by Love Real Estate Company ("LREC") pursuant to that certain
Management Consulting Agreement by and between the Company and LREC dated
March 25, 1987 (the "Management Agreement"). Mr. Schiffer is an employee of,
and receives an annual salary from LREC. Mr. Love receives only a nominal
salary from LREC. Neither the Company nor LREC maintains records, which
would allow either of them to attribute any portion of the remuneration Mr.
Schiffer receives from LREC to the management services he performs for the
Company. See Item 12. "Certain Relationships and Related Party Transactions"
for additional information about the Management Agreement.

         Neither Mr. Schiffer nor Mr. Love received fees from any source
directly attributable to their services as directors of the Company during
2005.

Item 11. Security Ownership of Certain Beneficial Owners and Management and
-------- ------------------------------------------------------------------
         Related Stockholder Matters
         ---------------------------

         The table below provides certain information as of March 25, 2006
regarding the beneficial ownership of the Common Stock and the Class A
cumulative convertible preferred stock (the "Preferred Stock") by each
person known by the Company to be the beneficial owner of more than five
percent of either the Common Stock or the Preferred Stock, each director of
the Company (which persons are also the Company's only executive officers),
and by virtue of the foregoing, the directors and executive officers of the
Company as a group.



                                                                                          Percent of Total
                                                                                          ----------------        Percent of
                                                    Common             Preferred         Common    Preferred     Total Voting
                  Name                               Stock               Stock          Stock(1)     Stock         Power (1)
                  ----                               -----               -----          --------   ---------     ------------
                                                                                                    
         Estate of Harold Vernon                     998,777(2)(3)             -         18.8%          -           13.7%
         Alfred M. Johns                             426,514(4)          125,000(4)       8.0%        6.3%           7.5%
         Love-PGI Partners, L.P.                   2,260,706(5)        1,875,000(5)      42.5%       93.8%          56.5%
         Andrew S. Love, Jr.                       2,263,215(6)        1,875,000(6)      42.5%       93.8%          56.5%
         Laurence A. Schiffer                      2,263,215(7)        1,875,000(7)      42.5%       93.8%          56.5%
         All executive officers and directors
         as a group (2 persons)                    2,263,215(8)        1,875,000(8)      42.5%       93.8%          56.5%


1.       The above table does not include 2,595,356 shares that may be received
         upon conversion of the Company's secured convertible debentures.
2.       The shares of Common Stock owned by the Estate of Mr. Vernon are
         currently in the possession of the Federal Deposit Insurance
         Corporation ("FDIC") which is the receiver for First American Bank
         and Trust, Lake Worth, Florida ("First American"). First American
         previously made a loan to Mr. Vernon, which was secured by these
         shares. The loan is in default and the Company understands that the
         FDIC has the right, pursuant to a pledge agreement, to vote the
         shares at any annual or special meeting of shareholders.
3.       Information obtained from filings made with the Securities and
         Exchange Commission.
4.       Sole voting and investment power over 405,613 shares of Common
         Stock; shared voting and investment power over 20,901 shares of
         Common Stock included in the table which are owned by Mr. John's
         wife; sole voting and investment power over the 125,000 shares of
         Preferred Stock.


                                     32




5.       The controlling general partner of L-PGI is Love Investment
         Company, a Missouri Corporation owned by Mr. Love, Love family
         members and trusts, the Estate of Martha Love Symington and Mr.
         Schiffer. Messrs. Love and Schiffer serve as the executive officers
         and directors of Love Investment Company.
6.       These shares are the same shares owned by L-PGI and PGIP, LLC
         (2,509). Mr. Love is an indirect owner of L-PGI and PGIP, LLC. See
         Footnote 5 above and Item 12. "Certain Relationships and Related
         Transactions" for more information.
7.       These shares are the same shares owned by L-PGI and PGIP, LLC
         (2,509). Mr. Schiffer is an indirect owner of L-PGI and PGIP, LLC.
         See Footnote 5 above and Item 12. "Certain Relationships and
         Related Transactions" for more information.
8.       These shares are the same shares reflected in Footnotes 5, 6 and 7.
         See Footnote 5 above and Item 12. "Certain Relationships and
         Related Transactions" for more information.

9.       Addresses for beneficial owners are as follows:

                                                                          
         Estate of Harold Vernon            Love-PGI Partners, L.P              Laurence A. Schiffer
         3201 W. Rolling Hills Circle       212 So. Central, Suite 100          212 So. Central, Suite 201
         Fort Lauderdale, FL 33328          St. Louis, MO 63105                 St. Louis, MO 63105

         Alfred M. Johns                    Andrew S. Love, Jr.
         One Woodland Drive                 212 So. Central, Suite 201
         Punta Gorda, FL 33950              St. Louis, MO 63105


         As of December 31, 2005, the Company did not have a compensation
plan under which its equity securities may be issued.

Item 12. Certain Relationships and Related Transactions
-------- ----------------------------------------------

         The Company's primary lender debt of $500,000 at December 31, 2005,
is with PGIP and is secured by substantially all of the Company's real
estate. PGIP became the primary lender in March 1996, with the assignment by
First Union, the Company's former primary bank lender, of all its right,
title and interest in and to the loan documents. PGIP is 100% owned by LSHC.
Messrs. Love and Schiffer own approximately 90% of all of the issued and
outstanding voting stock of LSHC and serve as the directors and officers of
LSHC. LSHC along with Messrs. Love and Schiffer are the managers of PGIP.

         As further security to the primary lender indebtedness with PGIP, a
restricted proceeds escrow was established with the closing of the bulk
acreage sale in May 1998. The escrow agreement permits funds to be paid (i)
as requested by PGI and agreed to by PGIP, or (ii) as deemed necessary and
appropriate by PGIP to protect its interest in the remaining real estate,
including its right to receive principal and interest payments on the
indebtedness, or (iii) to PGIP to pay any other obligations owed to PGIP by
the Company. At December 31, 2005 and 2004, the restricted escrow balance
was $255,000 and $252,000, respectively. The Company restored $250,000 of
the restricted escrow funds in September 2004.

         The Company maintains its administration and accounting offices
with the offices of LREC in St. Louis, Missouri. LREC, a Missouri
Corporation, is an affiliate of L-PGI, and is located at 212 South Central
Avenue, Suite 100, St. Louis, Missouri 63105. A fee of $2,800 per month was
paid to LREC in 2005 and 2004. The following is a list of services provided:

         1.  Maintain books of original entry;
         2.  Prepare quarterly and annual SEC filings;

                                     33




         3.  Coordinate the annual audit;
         4.  Assemble information for tax filing, review reports as
             prepared by tax accountants and file same;
         5.  Track Shareholder records through transfer agent;
         6.  Maintain policies of insurance against property and liability
             exposure;
         7.  Handle day-to-day accounting requirements; and
         8.  Provide telephone and computer service.

         Although an amount is paid to LREC as reimbursement for expenses
and as a fee for providing management services to the Company, neither the
Company nor LREC maintain records which would allow them to attribute any
portion of the aforementioned monthly fee to reimbursement of particular
expenses or to payment for the management services performed for the Company
by individual employees of LREC, including Messrs. Love and Schiffer.

         Effective as of March 25, 1987, the Company entered into the
Management Agreement with LREC. As a consultant to the Company and in
addition to the above services, LREC provides other services including, but
not limited to, strategic planning, marketing, and financing as requested by
the Company. In consideration for these consulting services, the Company
pays LREC a quarterly consulting fee of one-tenth of one percent of the book
value of the Company's assets, plus reasonable out-of-pocket expenses. As of
December 31, 2005, the book value of the Company's assets was approximately
$1.9 million. Consulting fees totaling $7,000 were accrued during 2005 and
2004, respectively. The Company made a payment of $7,000 and $12,000 in 2005
and 2004, respectively for consulting fees. As of December 31, 2005 and
2004, a total of $6,000 and $5,000, respectively, of unpaid fees had accrued
under the Management Agreement.

         The Management Agreement will continue in effect until terminated
upon 90 days prior written notice by a majority vote of the Company's
directors who have no financial interest in LREC or in any LREC affiliated
entity. Currently all directors have a financial interest in LREC or one of
its affiliates.

         Mr. Love receives a nominal salary from LREC. Although Mr. Schiffer
receives a salary from LREC, such salary compensates him for his services to
LREC, which provides consulting services for numerous other entities
affiliated with the Company, and none of the amount earned by LREC under the
Management Agreement is intended to be allocated or attributable to any
officer or employee, including Mr. Schiffer, of LREC. No part of Mr.
Schiffer's annual salary from LREC is directly attributable to the
management services he performs for the Company as an employee of LREC
pursuant to the Management Agreement.

         In 1989, the Company sold an aggregate $2,282,451 principal amount
of the Convertible Debentures ("Debentures") in a private placement to
Love-1989 Florida Partners, L.P. ("Love-1989"). The general partner of
                                   ---------
Love-1989 is Love Investment Company, which is owned by Mr. Love, Love
family members and trusts, the Estate of Martha Love Symington and Mr.
Schiffer. The above purchase by Love-1989 of the Debentures was funded in
part with a loan from L-PGI. Love-1989 repaid the debt to L-PGI in full, in
part by transferring a portion of the Debentures held by Love-1989 to L-PGI.
In July 1992, as partial consideration for the Company's conveyance of 350
acres of property to L-PGI, the Company retired $782,000 in principal amount
of the Debentures held by L-PGI together with $389,000 in accrued interest.

                                     34




The maturity date on all of the remaining Debentures was extended to July 8,
1997. The Debentures are past due and in default.

         The Debentures were in part collateralized by a second mortgage in
favor of Love-1989 on 650 acres of the property owned by the Company, which
was sold in May 1998. The 350 acres transferred to L-PGI as described above
were also included in the property sold. Messrs. Love and Schiffer have
caused the Company to grant a second mortgage on the 366 acre parcel of
property located in Hernando County, Florida to Love-1989 and in their
capacities as control persons of Love-1989, they caused Love-1989 to release
its second mortgage on the 650 acres of the property sold and they caused
the Company to grant a security interest to Love-1989 behind that held by
PGIP in the restricted proceeds escrow which is under the control of Messrs.
Love and Schiffer since they and a company they control are the managers of
PGIP.

         As of December 31, 2005, Love-1989 held $796,950 in principal
amount of the Debentures with respect to which there was at that date
accrued and unpaid interest in the amount of $6,781,000. In 1990, $703,050
principal amount of the Debentures was transferred by Love-1989 to one of
its (now former) limited partners. That former limited partner continues to
hold such Debentures and as of December 31, 2005 there was accrued and
unpaid interest with respect thereto in the amount of $5,878,000.

         In 1985, a corporation owned by Alfred M. Johns, the former
Chairman of the Company, and his family made an uncollateralized loan to the
Company, which at December 31, 2005 had an outstanding balance, excluding
accrued interest, of $176,000. This loan is past due. Besides being a direct
owner of Common and Preferred Stock, Mr. Johns has no other direct or
indirect affiliations with the Company.

         From time to time, the Company invests in short term debt
obligations with an affiliate of L-PGI, the Company's preferred shareholder,
Love Investment Company. The balance of this receivable at December 31, 2005
and 2004 was $600,000 and $340,000, respectively. Interest on such
receivables was $32,000 and $27,000 for 2005 and 2004, respectively.

         In 2005 and 2004, the Company incurred expenses totaling $2,000 and
$8,000, respectively, for the services of Hallmark Senior Housing, Inc., a
related entity, to provide analysis of real estate owned and options
available.

         The Company believes that the affiliated transactions are on terms
comparable to those which would be obtained from unaffiliated persons.


                                     35




Item 13. Exhibits
-------- --------

         Reference is made to the Exhibit Index contained on page 38 herein
         for a list of exhibits required to be filed under this Item.

Item 14. Principal Accountant Fees and Services
-------- --------------------------------------

         Audit and tax fees rendered by BKD, LLP, the principal accountant
of the Company, for the fiscal years ended December 31, 2005 and December
31, 2004 were:

                                                     2005         2004
                                                     ----         ----

                Audit Fees                         $23,900       $22,900
                Audit Related Fees                       0             0
                Tax Fees                             3,800         3,900
                All Other Fees                           0             0
                                                   -------       -------
                                                   $27,700       $26,800
                                                   =======       =======

         Tax fees are comprised of fees for tax compliance, tax planning,
and tax advice. Corporate tax services encompass a variety of permissible
services, including technical tax advice related to U.S. tax matters as well
as preparation of applicable tax returns.


                                     36





                      PGI INCORPORATED AND SUBSIDIARIES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                 PGI INCORPORATED
                                 (Registrant)

Date: March 31, 2006             By: /s/Laurence A. Schiffer
      --------------             -------------------------------
                                 Laurence A. Schiffer, President
                                 (Duly Authorized Officer and
                                 Principal Executive Officer)

In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and
on the dates indicated.

Signature                   Title                                Date

/s/Andrew S. Love           Chairman of the Board                March 31, 2006
------------------------    Secretary
Andrew S. Love


/s/Laurence A. Schiffer     Vice Chairman of the Board,          March 31, 2006
------------------------    President, Principal Executive
Laurence A. Schiffer        Officer, Principal Financial
                            Officer, and Principal Accounting
                            Officer


                                     37





 EXHIBIT INDEX

2.       Inapplicable.

3.1      Restated Articles of Incorporation of PGI Incorporated executed
         September 4, 1998 with certificate from the State of Florida dated
         October 27, 1998 (filed as Exhibit 3.1 to Registrant's September
         30, 1998 Form 10-QSB and incorporated herein by reference).

3.2      Certificate of the Designation, Powers, Preferences and Relative
         Rights, and the Qualifications, Limitations or Restrictions
         Thereof, which have not been set forth in the Articles of
         Incorporation, of the Class A Cumulative Convertible Preferred
         Stock, effective as of March 24, 1987 (filed as Exhibit 3.2 to
         Registrant's Form 10-K Annual Report for the year ended December
         31, 1986 ("1986 Form 10-K") and incorporated herein by reference).

3.3      Bylaws of Registrant, as amended September 1987 (filed as Exhibit
         3.3 to Registrant's original Form 10-K Annual Report for the year
         ended December 31, 1987 ("Original 1987 Form 10-K") dated as of
         March 29, 1987 and incorporated herein by reference).

3.4      Amendments to the Bylaws of the Registrant by the Board of
         Directors of PGI Incorporated by the Unanimous Written Consent,
         dated as of March 17, 1995 (filed as Exhibit 3.5 to the December
         31, 1995 Form 10-KSB and incorporated herein by reference).

4.1      Extension and Forbearance Agreement among PGI Incorporated, Punta
         Gorda Developers, Inc., Burnt Store Marina, Inc., and Gulf Coast
         Credit Corporation and BancFlorida (formerly Naples Federal Savings
         and Loan Association), dated as of March 25, 1987 (filed as Exhibit
         4.4 to the 1986 Form 10-K and incorporated herein by reference).

4.2      Seventh Mortgage and Loan Modification Agreement among PGI
         Incorporated, Punta Gorda Developers, Inc., Burnt Store Marina,
         Inc., and Gulf Coast Credit Corporation and BancFlorida, dated as
         of March 25, 1987 (filed as Exhibit 4.5 to the 1986 Form 10-K and
         incorporated herein by reference).


                                     38





EXHIBIT INDEX (continued)


4.3      Eighth Mortgage and Loan Modification Agreement among PGI
         Incorporated, Punta Gorda Developers, Inc., Burnt Store Marina, Inc.,
         and Gulf Coast Credit Corporation and BancFlorida, dated as of March
         25, 1987 (filed as Exhibit 4.6 to the 1986 Form 10-K and incorporated
         herein by reference).

4.4      Restated Loan and Security Agreement among PGI Incorporated, Punta
         Gorda Developers, Inc., Burnt Store Marina, Inc., and Gulf Coast
         Credit Corporation and BancFlorida, as well as Restated
         Consolidating Substituted Renewal Note and Future Advance Mortgage
         Note related thereto, dated as of March 25, 1987 (filed as Exhibit
         4.7 to the 1986 Form 10-K and incorporated herein by reference).

4.5      Forbearance Agreement among PGI Incorporated, Punta Gorda
         Developers, Inc., Burnt Store Marina, Inc., and Gulf Coast Credit
         Corporation and BancFlorida (Restated Loan Agreement No. 1), dated
         as of October 19, 1985 (filed as Exhibit 4.1 to the Registrant's
         Form 10-Q Quarterly Report for the quarter ended September 30, 1985
         and incorporated herein by reference).

4.6      Amendment to Restated Loan Agreement No. 1 (Receivables Loan), as
         well as Restated Consolidating Substituted Renewal Note relating
         thereto, dated as of March 25, 1987 (filed as Exhibit 4.9 to the
         1986 Form 10-K and incorporated herein by reference).

4.7      Extension, Forbearance and Modification Agreement between PGI
         Incorporated, Punta Gorda Developers, Inc., Burnt Store Marina,
         Inc., and Gulf Coast Credit Corporation, and BancFlorida, dated as
         of May 20, 1988 (filed as Exhibit 4.1 to the Registrant's Form 10-Q
         Quarterly Report for the quarter ended June 30, 1988 and
         incorporated herein by reference).

4.8      Ninth Mortgage and Loan Modification Agreement between PGI
         Incorporated, Punta Gorda Developers, Inc., Burnt Store Marina,
         Inc., and Gulf Coast Credit Corporation, and BancFlorida, dated as
         of May 20, 1988 (filed as Exhibit 4.2 to Registrant's Form 10-Q
         Quarterly Report for the quarter ended June 30, 1988 and
         incorporated herein by reference).

4.9      Purchase Agreement among Finova Financial Services, PGI
         Incorporated and Punta Gorda Developers, Inc., as well as certain
         Exhibits and the Mortgage related thereto, dated March 15, 1988
         (filed as Exhibit 1 to Registrant's Form 8-K dated as of March 28,
         1988 and incorporated herein by reference).

4.10     Tenth Mortgage and Loan Modification Agreement between PGI
         Incorporated, Punta Gorda Developers, Inc., as well as certain
         Exhibits and the Mortgage related thereto, dated May 30, 1989
         (filed as Exhibit 1 to Registrant's Form 8-K dated as of June 8,
         1989 and incorporated herein by reference).

                                     39




EXHIBIT INDEX (continued)



4.11     Eleventh Mortgage and Loan Modification Agreement among PGI
         Incorporated (formerly Punta Gorda Isles, Inc.), Sugarmill Woods,
         Inc. (formerly Punta Gorda Developers, Inc.), Burnt Store Marina,
         Inc. and Gulf Coast Credit Corporation and BancFlorida (formerly
         Naples Federal Savings and Loan Association), dated as of June 1,
         1990 (filed as Exhibit 4.2 to Registrant's Form 10-Q Quarterly
         Report for the quarter ended June 30, 1990 and incorporated herein
         by reference).

4.12     Loan Forbearance Agreement among PGI Incorporated (formerly Punta
         Gorda Isles, Inc.), Sugarmill Woods, Inc, (formerly Punta Gorda
         Developers, Inc.), Burnt Store Marina, Inc. and Gulf Coast Credit
         Corporation and BancFlorida (formerly Naples Federal Savings and
         Loan Association), dated as of October 17, 1991 (filed as Exhibit
         4.12 to Registrant's Form 10-K dated March 30, 1994 and
         incorporated herein by reference).

4.13     Twelfth Mortgage and Loan Modification Agreement among PGI
         Incorporated, Sugarmill Woods, Inc., Burnt Store Marina, Inc. and
         Gulf Coast Credit Corporation and BancFlorida, dated as of July 8,
         1992 (filed as Exhibit 4.1 to Registrant's Form 8-K dated as of
         July 24, 1992, and incorporated herein by reference).

4.14     Thirteenth Mortgage and Loan Modification Agreement among PGI
         Incorporated, Sugarmill Woods, Inc., Burnt Store Marina, Inc., Gulf
         Coast Credit Corporation and First Union, dated as of May 13, 1994
         (filed as Exhibit 4.1 to Registrant's Form 8-K dated May 27, 1994
         and incorporated herein by reference).

4.15     Forbearance Agreement dated as of October 12, 1995 by First Union
         National Bank of Florida, PGI Incorporated, Sugarmill Woods, Inc.,
         Burnt Store Marina, Inc., Gulf Coast Credit Corporation, Southern
         Woods, Incorporated, Punta Gorda Isles, Inc., Deep Creek Utilities,
         Inc., Burnt Store Utilities, Inc., and Sugarmill Woods Sales, Inc.
         (filed as Exhibit 4(i) to Registrant's Form 8-K on November 1, 1995
         and incorporated herein by reference).

4.16     Note and Loan Document Purchase Agreement dated as of October 12,
         1995 by First Union National Bank of Florida, PGIP, L.L.C., PGI
         Incorporated, Sugarmill Woods, Inc., Burnt Store Marina, Inc., and
         Gulf Coast Credit Corporation (filed as Exhibit 4 (ii) to
         Registrant's Form 8-K on November 1, 1995 and incorporated herein
         by reference).

4.17     Note Purchase and Loan Transaction dated as of March 28, 1996, by
         First Union National Bank of Florida, PGIP, LLC, PGI Incorporated,
         Sugarmill Woods, Inc., Burnt Store Marina, Inc. and Gulf Coast
         Credit Corporation (filed as Exhibit 4.17 to Registrant's Form
         10-KSB/A dated August 27, 1997, and incorporated herein by
         reference).

9.       Inapplicable.


                                     40




EXHIBIT INDEX (continued)


10.3     Preferred Stock Purchase Agreement by and between PGI Incorporated
         and Love Development and Investment Company, dated as of February
         16, 1987 (filed as Exhibit (i) to the Registrant's Form 8-K Current
         Report dated February 25, 1987 and incorporated herein by
         reference).

10.4     Form of Convertible Debenture Agreement due April 30, 1992 between
         PGI Incorporated and Love-1989 Florida Partners, L.P. and Mortgage
         and Security Agreement dated July 28, 1989 between Sugarmill Woods,
         Inc. and Love-1989 Florida Partners, L.P. (filed as Exhibit 10.9 to
         the Registrant's Form 10-K Annual Report for the year ended
         December 31, 1989 and incorporated herein by reference).

10.5     Consulting Agreement between PGI Incorporated and Love Real Estate
         Company, dated as of March 25, 1987 (filed as Exhibit 10.7 to the
         1986 Form 10-K and incorporated herein by reference).

11.      See Note 18 to the consolidated financial statements.

13.      Inapplicable.

14.      Inapplicable (See discussion regarding code of ethics under Item 9.
         of this Form 10-KSB).

16.      Inapplicable.

18.      Inapplicable.

20.      Inapplicable.

21.      Subsidiaries of the Registrant, filed herein.

22.      Inapplicable.

23.      Inapplicable.

24.      Inapplicable.

31.1     Principal Executive Officer certification pursuant to Rule
         13a-14(a) under the Securities Exchange Act of 1934, as amended,
         filed herein.

31.2     Principal Financial Officer certification pursuant to Rule
         13a-14(a) under the Securities Exchange Act of 1934, as amended,
         filed herein.

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EXHIBIT INDEX (continued)


32.1     Principal Executive Officer Certification pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002, filed herein.

32.2     Principal Financial Officer Certification pursuant to 18 U.S.C.
         Section 1350, as adopted pursuant to Section 906 of the
         Sarbanes-Oxley Act of 2002, filed herein.

99.      Not applicable.

100.     Not applicable.


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