<PAGE>

                                 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, 2007
                                   --------------------------------------------

(  )     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
       incorporation or organization)                        Ident. No.)

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: $117,000.
                                                                      --------

         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 28, 2008, 5,317,758 shares of Common Stock, par value
         -----------------------------------------------------------------
$.10 per share were outstanding.
--------------------------------


<PAGE>
<PAGE>

<TABLE>
                                  PGI INCORPORATED AND SUBSIDIARIES
                                         FORM 10 - KSB - 2007
                                  Contents and Cross Reference Index


<CAPTION>
Part     Item                                                                             Form 10-KSB
No.      No.      Description                                                               Page No.
---      ---      -----------                                                               --------

<C>      <C>      <C>                                                                        <C>
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......................................29

         8A       Controls and Procedures......................................................29

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

III      9        Directors, Executive Officers, Promoters, Control Persons,
                      and Corporate Governance:
                      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, and Directors
                      Independence.............................................................33

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

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

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

Exhibit Index..................................................................................38
</TABLE>



                                       2

<PAGE>
<PAGE>

                                    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 15 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 of the Company 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 sites are subject to easements which markedly
reduce their value and/or consist of wetlands of indeterminate value. As of
December 31, 2007, the Company also owned seven single family lots, located in
Citrus County, Florida.

         As of December 31, 2007, 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.

         The 366 acre parcel in Hernando County is difficult to value because
of uncertainty related to the possible extension of the Suncoast Expressway,
which terminates on the south side of Route 98 opposite this property.
Planning continues for the proposed northward continuation of the Suncoast
Expressway, and based on a recent endorsement by the Citrus County Commission
to re-adopt a project that was originally approved in 1998, the route that is
presently believed to be the most probable is through the middle of this
parcel of property. However, until and unless the uncertainty regarding the
future expansion of the Suncoast Expressway is resolved, planning with respect
to this property is difficult.


                                       3

<PAGE>
<PAGE>

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 of this parcel, 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.

         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 $605,000 in principal and accrued
interest and the convertible debentures held by Love-1989 Florida Partners,
L.P. ("Love-1989") which total $9,979,000 in principal and accrued interest at
December 31, 2007. The primary lender debt and convertible debentures are past
due and in default. (See Notes 7 and 9 to the Consolidated Financial
Statements under Item 7)

         The Company also owns a number 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 also owns seven single family lots in Citrus County,
Florida. The Company continues its efforts to dispose of all of its real
estate.

         The Company believes the properties are adequately covered by
insurance.

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

         The Company currently is not a party in any legal proceedings.

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

         A shareholders meeting was not held during the fiscal year ended
December 31, 2007.


                                       4

<PAGE>
<PAGE>

                                    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, ("PGIP") 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 on the Common
Stock is restricted under the terms of the two indentures pursuant to which
the Company's outstanding subordinated convertible debentures are issued and
by the terms of the Company's preferred stock. As of December 31, 2007 to the
Company's knowledge, there were 604 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:

<TABLE>
<CAPTION>
                                                                         12/31/2007
                                                                   Principal       Unpaid
                                                                  Amount Due      Interest
                                                                  ----------      --------
                                                                       ($ in thousands)

<C>                                                                 <C>           <C>
         Subordinated debentures due June 1, 1991                   $ 1,034       $  1,255
         Subordinated debentures due May 1, 1992                      8,025         12,893
                                                                    -------       --------
                                                                    $ 9,059       $ 14,148
                                                                    =======       ========
</TABLE>

         Both issues have been in payment default for approximately fifteen
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 (especially those with respect to the subordinated
convertible debentures which matured on June 1, 1991) might be barred under
the applicable statutes of limitations.

                                      5

<PAGE>
<PAGE>

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


         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,
2007 totaled approximately $ 35,700,000.

         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 Stockholders' Deficiency. As of December 31,
2007, the Stockholders' Deficiency of the Company was $44,621,000.

         Similar defenses would not appear to apply to other creditors of the
Company, and the credit and debenture agreements with the Company's primary
lender, PGIP, and the initial holder of its secured convertible debentures are
secured by mortgages and security interests in certain 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 its primary lender (or to the initial
holder of the secured convertible debentures), as required should the asset
sale which generates such surplus include the collateral securing such debt.

         The Company attempts to realize full market value for each such
asset, which may be at substantial variance from its present carrying value.
However, the remaining major assets of the Company 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 seek the liquidation of
assets 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

<PAGE>
<PAGE>

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

RESULTS OF OPERATIONS
Revenues
--------

         Revenues for the year ended December 31, 2007 decreased by $303,000
to $117,000 compared to revenues of $420,000 for the year ended December 31,
2006 primarily reflecting a decrease in other income of $326,000. The other
income in 2006 includes $312,000 as a result of the reversal of accrued real
estate taxes related to the 1997 agricultural exemption status of the
Company's undeveloped Sugarmill Woods property, which had been in litigation
in Citrus County, and had been finally concluded. Real estate sales revenue
increased by $20,000 in the year ended December 31, 2007 due to the sale of a
single family lot in the first quarter of 2007.

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

         Expenses for the years 2007 and 2006 were:

<TABLE>
<CAPTION>
                                              2007             2006
                                              ----             ----
<C>                                        <C>              <C>
         Cost of Real Estate Sales         $    5,000       $        -
         Taxes and Assessments                 20,000           21,000
         Consulting and Accounting             41,000           41,000
         Legal and Professional               101,000           46,000
         General and Administrative            54,000           65,000
</TABLE>

         Costs of Real Estate Sales increased by $5,000 in 2007 as a result of
the sale of one lot during 2007. In 2006 there was only the sale of a small
parcel of real estate, which was carried at no value on the Company's books.
Legal and professional expenses increased by $55,000 in 2007 due to expenses
incurred on a parcel in Citrus County requiring some environmental
remediation. General and Administrative expenses decreased by $11,000 as a
result of additional records storage expenses in 2006.

Interest expense for the two years ended December 31, 2007 and 2006 was:

<TABLE>
<CAPTION>
                                              2007               2006
                                              ----               ----
                                                 ($ in thousands)
<C>                                          <C>                <C>
         Interest Expense                    $3,623             $3,285
</TABLE>

         Interest expense in 2007 increased by $338,000 compared to 2006 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 the average interest rates during 2007.

         The net loss was $3,727,000 ($.82 per share) for 2007 compared to a
net loss of $3,038,000 ($.69 per share) for 2006. Included in the 2007 and
2006 earnings per share computation is $640,000 ($.12 per share of Common
Stock) of annual cumulative preferred stock dividends in arrears.

                                      7

<PAGE>
<PAGE>

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

FINANCIAL CONDITION

         Total assets decreased by $50,000 at December 31, 2007 compared to
total assets at December 31, 2006 reflecting the following changes:

<TABLE>
<CAPTION>
                                                                                  Increase
                                             2007              2006              (Decrease)
                                             ----              ----              ----------
                                               ($ in thousands)
<C>                                         <C>               <C>                  <C>
Cash and Cash Equivalents                   $   16            $    3               $    13
Restricted Cash                                  5                 5                     -
Receivables                                    878               926                   (48)
Land and Improvement                           639               641                    (2)
Other Assets                                   186               199                   (13)
                                            ------            ------               -------
                                            $1,724            $1,774               $   (50)
                                            ======            ======               =======
</TABLE>

         Cash increased by $13,000 to $16,000 at December 31, 2007 compared to
$3,000 at December 31, 2006. Net cash provided by operations was $7,000 for
the year ended December 31, 2007 compared to net cash used in operations of
$107,000 for the year ended December 31, 2006. Net cash used in or provided by
operations consists of cash received from operations less cash expended for
operations.

         Cash received from operations during 2007 was $160,000, an $82,000
increase from cash received during 2006 of $78,000, reflecting an increase in
payments resulting from real estate sales ($20,000) and in interest received
($76,000) resulting from an investment in a short-term note with Love
Investment Company ("LIC"), an affiliate of Love-PGI Partners, L.P. ("L-PGI"),
the Company's preferred shareholder, which was offset by a decrease in other
operating receipts ($14,000).

         Cash expended for operations decreased by $32,000 to $153,000 during
2007 from $185,000 in 2006, reflecting decreases in interest payments
($32,000), legal and professional ($39,000), and general and administrative
($10,000), while being offset by an increase in payments for real estate sales
($3,000), taxes and assessments ($38,000), and consulting and accounting
($8,000).

         During 2007, investing activities provided $6,000 of cash, which
consisted of net proceeds from the investment in a short-term note with LIC,
an affiliate of L-PGI, the Company's primary preferred shareholder.

         During 2006, investing activities utilized $37,000 of cash, which
consisted of a $273,000 investment in a short-term note with LIC, and $16,000
in expenditures relating to purchases of inventory and deferred expenditures,
which was offset by the receipt of $252,000 from the release of restricted
cash.


                                      8

<PAGE>
<PAGE>

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

         Liabilities were approximately $46,300,000 at December 31, 2007
compared to approximately $42,700,000 at December 31, 2006, reflecting the
following changes:

<TABLE>
<CAPTION>
                                                                                        Increase
                                                      2007              2006           (Decrease)
                                                      ----              ----           ----------
                                                         ($ in thousands)
<C>                                                 <C>               <C>                <C>
Accounts payable and accrued expenses               $   115           $    52            $   63
Accrued real estate taxes                                 9                18                (9)
Accrued interest                                     33,964            30,341             3,623
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                 -
                                                    -------           -------            ------
                                                    $46,345           $42,668            $3,677
                                                    =======           =======            ======
</TABLE>

         The $63,000 increase in accrued expenses is due to expenses incurred
during the first quarter of 2007 on a parcel of property located in Citrus
County requiring some environmental remediation. The $3,623,000 increase in
accrued interest at December 31, 2007 compared to year-end 2006 reflects
changes in the following:

<TABLE>
<CAPTION>
                                                                                        Increase
                                                      2007               2006          (Decrease)
                                                      ----               ----          ----------
                                                         ($ in thousands)
<C>                                                 <C>                <C>               <C>
Primary Lender                                      $   105            $    39           $   66
Debentures                                           31,293             27,854            3,439
Other                                                 2,566              2,448              118
                                                    -------            -------           ------
                                                    $33,964            $30,341           $3,623
                                                    =======            =======           ======
</TABLE>

         The accrued interest relating to debentures increased due to the
nonpayment of previously accrued interest on the Company's debentures (see
Notes 8 and 9 to the consolidated financial statements under Item 7).

         The Company's stockholders' deficiency increased to $44,621,000 at
December 31, 2007 from a $40,894,000 stockholders' deficiency at December 31,
2006, reflecting the 2007 operating loss of $3,727,000.


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

         In December 2007 the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 160
"Noncontrolling Interests in Consolidated Financial Statements-an amendment of
ARB No. 51" effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008. The Company does not
expect this statement to have a material impact on the results of operations
or financial position.

                                      9

<PAGE>
<PAGE>

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


         As revised in 2007, the FASB issued SFAS No. 141R, "Business
Combinations", a revision of SFAS No. 141 effective for business combinations
for which the acquisition date is on or after December 15, 2008. The Company
does not expect this statement to have a material impact on the results of
operations or financial position.

         In February 2007 FASB issued SFAS 159 "The Fair Value Option for
Financial Assets and Financial Liabilities-including an amendment of SFAS No.
115" effective for fiscal years that begin after November 15,2007. The Company
does not expect this statement to have a material impact on the results of
operations or financial position.

         In September 2006 the FASB issued SFAS No. 158 "Employers' Accounting
for Defined Benefit Pension and Other Postretirement Plans" effective as of
the end of the fiscal year ending after June 15, 2007. Management has
determined that the implementation of SFAS No. 158 will not have an effect on
the Company's financial statements.

         In September 2006 the FASB issued SFAS 157 "Fair Value Measurements"
effective for fiscal years beginning after November 15, 2007, and all interim
periods within those fiscal years. The Company does not expect this statement
to have a material impact on the results of operations or financial position.

         In June 2006 the FASB issued FIN 48 "Accounting for Uncertainty in
Income Taxes-an Interpretation of FASB Statement No. 109" effective for fiscal
years beginning after December 15, 2006. Management has determined that the
implementation of FIN 48 will not have an effect on the Company's financial
statements.

         In March 2006, the FASB issued SFAS No. 156, "Accounting for
Servicing of Financial Assets, an amendment of FASB Statement No. 140". SFAS
No. 156 became 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.

                                      10

<PAGE>
<PAGE>

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


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 statements. Such statements are
based upon the information currently available to management of the Company
and management's perception thereof as of the date of the Form 10-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 statements. The differences could be caused by a number of
factors or combination of factors including, but not limited to: changes in
the real estate market in Florida and the counties in which the Company owns
any property; institution of legal action by the bondholders for collection of
any amounts due under the subordinated convertible debentures (notwithstanding
the Company's belief that at least a portion of such actions might be barred
under applicable statute of limitations); continued failure by governmental
authorities to make a decision with respect to the Suncoast Expressway as
described under Item 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

<PAGE>
<PAGE>

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, 2007 and 2006, 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. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing auditing
procedures that are appropriate in the circumstances, but not for the purpose
of expressing an opinion on the effectiveness of the Company's internal
control over financial reporting. Accordingly, we express no such opinion. Our
audits also included examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management and 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, 2007 and 2006, 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 7), certain sinking fund
and interest payments on its convertible subordinated debentures (Note 8) and
its convertible debentures (Note 9). 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 8. The financial statements do not
include any adjustments that might result from the outcome of this
uncertainty.


                                          /s/ BKD, LLP
St. Louis, Missouri
March 28, 2008


                                      12

<PAGE>
<PAGE>

<TABLE>
                                      PGI INCORPORATED AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                                         December 31, 2007 and 2006


<CAPTION>
                                    ASSETS                                                LIABILITIES
                                    ======                                                ===========
                                  2007         2006                                       2007          2006
                                  ----         ----                                       ----          ----

<C>                        <C>           <C>            <C>                        <C>          <C>
Cash and cash equivalents      $16,000       $3,000     Accounts payable and          $115,000       $52,000
                                                        accrued expenses (Note 6)
Restricted cash (Note 3)         5,000        5,000
                                                        Accrued real estate taxes        9,000        18,000
Receivables (Note 14)          878,000      926,000     (Note 6)

Land and improvement           639,000      641,000
Inventories (Note 4)                                    Accrued Interest:
                                                        Primary Lender                 105,000        39,000
Other assets (Note 5)          186,000      199,000     Debentures (Notes 8 & 9)    31,293,000    27,854,000
                                                        Other (Note 8)               2,566,000     2,448,000

                                                        Credit Agreements (Note 7)
                                                        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 8)

                                                        Convertible debentures
                                                        payable (Note 9)             1,500,000     1,500,000
                                                                                     ---------     ---------

                                                        Commitments and             46,345,000    42,668,000
                                                                                    ----------    ----------
                                                        Contingencies (Note 13)

                                                        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 11)                    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 11)                      532,000       532,000
                                                        Paid-in capital             13,498,000    13,498,000

                                                        Accumulated deficit        (60,651,000)  (56,924,000)
                                                                                   ------------ ------------
                                                                                   (44,621,000)  (40,894,000)
                           -----------   ----------                                ------------ ------------
                           $ 1,724,000   $1,774,000                                $ 1,724,000  $  1,774,000
                           ===========   ==========                                ============ ============

                         See accompanying notes to consolidated financial statements
</TABLE>

                                      13

<PAGE>
<PAGE>

<TABLE>
                                     PGI INCORPORATED AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF OPERATIONS
                                   Years ended December 31, 2007 and 2006

<CAPTION>
                                                                   2007                            2006
                                                                   ----                            ----
<C>                                                             <C>                             <C>
Revenues:
         Real estate sales (Note 2)                             $    30,000                     $    10,000
         Interest income                                             86,000                          83,000
         Other income (Note 2)                                        1,000                         327,000
                                                                -----------                     -----------
                                                                    117,000                         420,000
                                                                -----------                     -----------

Costs and expenses:
         Cost of real estate sales (Note 2)                           5,000                               -
         Interest                                                 3,623,000                       3,285,000
         Taxes and assessments                                       20,000                          21,000
         Consulting and accounting                                   41,000                          41,000
         Legal and professional                                     101,000                          46,000
         General and administrative                                  54,000                          65,000
                                                                -----------                     -----------
                                                                  3,844,000                       3,458,000
                                                                -----------                     -----------

Net (Loss)                                                      $(3,727,000)                    $(3,038,000)
                                                                ===========                     ===========

(Loss) Per Share Available to Common
  Stockholders - Basic and Diluted (Note 16)                          $(.82)                          $(.69)
                                                                      =====                           =====

                        See accompanying notes to consolidated financial statements.
</TABLE>



                                      14

<PAGE>
<PAGE>

<TABLE>
                                   PGI INCORPORATED AND SUBSIDIARIES
                                 CONSOLIDATED STATEMENTS OF CASH FLOWS
                                 Years ended December 31, 2007 and 2006


<CAPTION>
                                                                               2007            2006
                                                                               ----            ----
<C>                                                                          <C>             <C>
Cash flows from operating activities:

Cash received from operations:
      Collections from real estate sales and receivables on such sales       $ 30,000        $  10,000
      Interest received                                                       129,000           53,000
      Other operating receipts                                                  1,000           15,000
                                                                             --------        ---------
                                                                              160,000           78,000
                                                                             --------        ---------

Cash expended for operations:
      Payments for real estate sales                                            3,000                -
      Interest paid                                                                 -           32,000
      Taxes and assessments                                                    39,000            1,000
      Consulting and accounting                                                47,000           39,000
      Legal and professional                                                   10,000           49,000
      General and administrative                                               54,000           64,000
                                                                             --------        ---------
                                                                              153,000          185,000
                                                                             --------        ---------

      Net cash flow provided by (used in) operating activities                  7,000         (107,000)
                                                                             --------        ---------

Cash flows from investing activities:
      Net borrowings (repayments) of notes receivable                           6,000         (273,000)
      Purchases of inventory and deferred expenditures                              -          (16,000)
      Proceeds from release of restricted cash                                      -          252,000
                                                                             --------        ---------
Net cash flow provided by (used in) investing activities                        6,000          (37,000)
                                                                             --------        ---------





Net increase (decrease) in cash and cash equivalents                           13,000         (144,000)

Cash and cash equivalents at beginning of year                                  3,000          147,000
                                                                             --------        ---------
Cash and cash equivalents at end of year                                     $ 16,000        $   3,000
                                                                             ========        =========



                      See accompanying notes to consolidated financial statements.
</TABLE>


                                      15

<PAGE>
<PAGE>

<TABLE>
                                   PGI INCORPORATED AND SUBSIDIARIES
                           CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
                                 Years ended December 31, 2007 and 2006


<CAPTION>
                                                                            2007               2006
                                                                            ----               ----
<C>                                                                     <C>                <C>
Reconciliation of net (loss) to net cash provided by (used in)
      operating activities:

Net (loss)                                                              $(3,727,000)       $(3,038,000)

Adjustments to reconcile net (loss) to net cash provided by
      (used in) operating activities:
         Earnings capitalized into restricted cash                                -             (2,000)

(Increase) decrease in assets:
      Other receivables                                                      42,000            (19,000)
      Land and improvement inventories-net                                    2,000                  -
      Prepaid expenses and deposits                                          14,000             (9,000)
Increase (decrease) in liabilities:
      Accounts payable and accrued expenses                                  63,000              2,000
      Accrued real estate taxes                                             (10,000)          (294,000)
      Accrued interest                                                    3,623,000          3,253,000
                                                                        -----------        -----------


Net cash flow provided by (used in) operating activities                $     7,000        $  (107,000)
                                                                        ===========        ===========



                      See accompanying notes to consolidated financial statements.
</TABLE>


                                      16

<PAGE>
<PAGE>

<TABLE>
                                           PGI INCORPORATED AND SUBSIDIARIES
                                  CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
                                        Years ended December 31, 2007 and 2006


<CAPTION>
                             Preferred Stock                    Common Stock
                             ---------------                    ------------                             Accumulated
                           Shares     Par Value              Shares     Par Value    Paid-In Capital        Deficit
                           ------     ---------              ------     ---------    ---------------        -------

<C>                      <C>          <C>                  <C>           <C>           <C>               <C>
Balances at 1/1/06       2,000,000    $2,000,000           5,317,758     $532,000      $13,498,000       $(53,886,000)

Net Loss                         -             -                   -            -                -         (3,038,000)
                         ---------    ----------           ---------     --------      -----------       ------------
Balances at 12/31/06     2,000,000    $2,000,000           5,317,758     $532,000      $13,498,000       $(56,924,000)

Net Loss                         -             -                   -            -                -         (3,727,000)
                         ---------    ----------           ---------     --------      -----------       ------------
Balances at 12/31/07     2,000,000    $2,000,000           5,317,758     $532,000      $13,498,000       $(60,651,000)
                         =========    ==========           =========     ========      ===========       ============




                                See accompanying notes to consolidated financial statements.
</TABLE>


                                      17

<PAGE>
<PAGE>

                       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 Standards 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.

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

         For purposes of the statements 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

<PAGE>
<PAGE>

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

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

         In December 2007 the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standard ("SFAS") No. 160
"Noncontrolling Interests in Consolidated Financial Statements-an amendment of
ARB No. 51" effective for fiscal years, and interim periods within those
fiscal years, beginning on or after December 15, 2008. The Company does not
expect this statement to have a material impact on the results of operations
or financial position.

         As revised in 2007, the FASB issued SFAS No. 141R, "Business
Combinations", a revision of SFAS No. 141 effective for business combinations
for which the acquisition date is on or after December 15, 2008. The Company
does not expect this statement to have a material impact on the results of
operations or financial position.

         In February 2007 FASB issued SFAS 159 "The Fair Value Option for
Financial Assets and Financial Liabilities-including an amendment of SFAS No.
115" effective for fiscal years that begin after November 15,2007. The Company
does not expect this statement to have a material impact on the results of
operations or financial position.

         In September 2006 the FASB issued SFAS No. 158 "Employers' Accounting
for Defined Benefit Pension and Other Postretirement Plans" effective as of
the end of the fiscal year ending after June 15, 2007. Management has
determined that the implementation of SFAS No. 158 will not have an effect on
the Company's financial statements.

         In September 2006 the FASB issued SFAS 157 "Fair Value Measurements"
effective for fiscal years beginning after November 15, 2007, and all interim
periods within those fiscal years. The Company does not expect this statement
to have a material impact on the results of operations or financial position.

         In June 2006 the FASB issued FIN 48 "Accounting for Uncertainty in
Income Taxes-an Interpretation of FASB Statement No. 109" effective for fiscal
years beginning after December 15, 2006. Management has determined that the
implementation of FIN 48 will not have an effect on the Company's financial
statements.

         In March 2006, the FASB issued SFAS No. 156, "Accounting for
Servicing of Financial Assets, an amendment of FASB Statement No. 140". SFAS
No. 156 became 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.

                                      19

<PAGE>
<PAGE>

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

         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.


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

Real estate sales and cost of sales consisted of:

<TABLE>
<CAPTION>
                                                        2007                       2006
                                                        ----                       ----

<C>                                                  <C>                        <C>
         Homesite/acreage sales                      $  30,000                  $  10,000
         Cost of Sales                                   5,000                          -
                                                     ---------                  ---------
         Gross Profit Margin                         $  25,000                  $  10,000
                                                     =========                  =========
</TABLE>

         In the first quarter of 2007, the Company completed the sale of a
         single family lot at the price of $30,000.

         In the second quarter of 2006, the Company completed the sale of a
         small piece of land at the price of $10,000. This odd remnant of a
         lot was not carried for any value on the Company's books.

         Other income for the years 2007 and 2006 was $1,000 and $327,000,
         respectively. The other income for 2006 includes $312,000 which
         resulted from the reversal of accrued real estate taxes due to the
         ultimate conclusion of the lawsuit in Citrus County regarding the
         1997 agricultural exemption status of the Company's undeveloped
         Sugarmill Woods property.

                                      20

<PAGE>
<PAGE>

                       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. (See Note 14)

         The restricted escrow funds balance was $5,000 at both December 31,
2007 and December 31, 2006. The Company utilized $220,000 of the primary
lender restricted escrow in 2006 to invest in a short-term note with an
affiliate of L-PGI, the Company's preferred shareholder, Love Investment
Company, and utilized $32,000 for interest payments to PGIP on the primary
lender debt. Interest earned on the restricted cash in 2007 was $40.


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

<TABLE>
<CAPTION>
                                                                2007              2006
                                                                ----              ----
<C>                                                           <C>               <C>
                  Unimproved land                             $625,000          $625,000
                  Fully improved land                           14,000            16,000
                                                              --------          --------
                                                              $639,000          $641,000
                                                              ========          ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                2007             2006
                                                                ----             ----
<C>                                                           <C>              <C>
                  Deposit with Trustee of 6 1/2%
                     debentures                               $180,000         $172,000
                  Prepaid Expenses                               5,000            5,000
                  Deferred Charges                               1,000           22,000
                                                              --------         --------
                                                              $186,000         $199,000
                                                              ========         ========
</TABLE>

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

<TABLE>
<CAPTION>
                                                                2007             2006
                                                                ----             ----
<C>                                                           <C>              <C>
                  Accounts payable                            $  9,000         $ 12,000
                  Accrued audit/tax expense                     33,000           32,000
                  Accrued consulting fees                        2,000            2,000
                  Accrued accounting services                        -            5,000
                  Accrued miscellaneous                         71,000            1,000
                                                              --------         --------
                                                              $115,000         $ 52,000
                                                              ========         ========

         Accrued Real Estate Taxes:
         --------------------------
         Accrued real estate taxes consisted of:


                  Current                                     $  9,000         $ 18,000
                                                              ========         ========
</TABLE>

                                      21

<PAGE>
<PAGE>


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


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

<TABLE>
<CAPTION>
                                                                 2007              2006
                                                                 ----              ----
<C>                                                           <C>               <C>
         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
                                                              ==========        ==========
</TABLE>

The prime rate at December 31, 2007 and 2006 was 7.25% and 8.25% respectively.

         At December 31, 2007 assets collateralizing the Company's credit
agreements with its primary lender totaled $644,000, of which $5,000
represented escrow held by the primary lender, and $639,000 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 10.9% as of December 31, 2007 and 10.8% as of December 31, 2006.

         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 on other notes payable was $2,566,000 and $2,448,000
at December 31, 2007 and 2006, respectively.

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

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

<TABLE>
<CAPTION>
                                                                   2007                      2006
                                                                   ----                      ----
<C>                                                             <C>                       <C>
                  6 1/2%, due June 1991                         $1,034,000                $1,034,000
                  6%, due May 1992                               8,025,000                 8,025,000
                                                                ----------                ----------
                                                                $9,059,000                $9,059,000
                                                                ==========                ==========
</TABLE>

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


                                      22

<PAGE>
<PAGE>

                       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 $14,148,000 at December 31, 2007 and
$13,106,000 as of December 31, 2006.

         The debentures are not collateralized and are not subordinated to
each other, but are subordinated to senior indebtedness ($3,198,000 at
December 31, 2007). 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.

9.       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 on the 366 acres retained by the Company and a security interest
behind that held by PGIP in the restricted proceeds escrow.

         Accrued interest was $17,144,000 and $14,748,000 at December 31, 2007
and 2006 respectively.


                                      23

<PAGE>
<PAGE>

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


10.      Income Taxes:
         -------------

         Reconciliation of the statutory federal income tax rates, 34% for the
years ended December 31, 2007 and 2006, to the Company's effective income tax
rates follows:

<TABLE>
<CAPTION>
                                                  2007                                         2006
                                                  ----                                         ----
                                                                    ($ in thousands)
                                                         Percent of                                 Percent of
                                   Amount of tax        Pre-tax Loss            Amount of Tax      Pre-tax loss
                                   -------------        ------------            -------------      ------------
<C>                                  <C>                   <C>                    <C>                 <C>
Expected tax (credit)                $  (1,243)            (34.0%)                $(1,033)            (34.0%)
State income taxes, net of                (146)             (4.0%)                   (122)             (4.0%)
  federal tax benefits
Increase in valuation allowance
                                         1,389              38.0%                   1,155              38.0%
                                     ---------             ------                 -------             ------
                                     $       -                  -                 $     -                  -
                                     =========             ======                 =======             ======
</TABLE>



         At December 31, 2007, the Company had an operating loss carryforward
of approximately $ 35,700,000 which will expire at various dates through 2027.

<TABLE>
<CAPTION>
                                                                    2007               2006
                                                                    ----               ----
                                                                       ($ in thousands)
<C>                                                               <C>                <C>
Deferred tax asset:
         Net operating loss carryover                             $ 13,561           $ 15,884
         Adjustments to reduce land to net
            realizable value                                            12                 12
         Expenses capitalized under IRC 263(a)                          56                 56
         Environmental liability                                        70                  -
         Valuation allowance                                       (13,527)           (15,780)
                                                                  --------           --------
                                                                  $    172           $    172
Deferred tax liability:
         Basis difference of land and
            improvement inventories                               $    172           $    172
                                                                  --------           --------

Net deferred tax asset                                            $      -           $      -
                                                                  ========           ========
</TABLE>


                                      24

<PAGE>
<PAGE>

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


11.      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 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, 2007
cumulative preferred dividends in arrears totaled $8,115,000 ($640,000 of
which related to the year ended December 31, 2007). 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, 2007, 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, 2007 the Company had reserved 6,355,356 common shares
for the conversion of preferred stock and debentures.

12.      Quarterly Results:
---      ------------------

         There were no significant transactions in the fourth quarter of 2007.



                                      25

<PAGE>
<PAGE>

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

13.      Commitments and Contingencies:
         ------------------------------

         The Company is currently not a party in any legal proceedings.

14.      Related Party Transactions:
         ---------------------------

         As of December 31, 2007 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 accrued in 2007 and
2006. The Company made payments of $39,200 and $28,000 to LREC in 2007 and
2006 respectively for accounting service fees. Accrued accounting service fees
were $0 and $6,000 as of December 31, 2007 and 2006, respectively.



                                      26

<PAGE>
<PAGE>

                       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, 2007, the carrying value of the Company's assets was approximately
$1,724,000. Consulting fees were $7,000 in both 2007 and 2006, respectively.
As of December 31, 2007 and 2006, a total of $2,000, 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,
2007 had an outstanding balance, including accrued interest, of $530,000.
Interest accrued on this loan was $18,000 for the years 2007 and 2006,
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 of this receivable at December 31, 2007 and 2006 was
$867,000 and $873,000, respectively. Interest on the loans was $77,000 and
$72,000 for 2007 and 2006, respectively.

         In 2007 and 2006 the Company incurred expenses totaling $1,000 and
$18,000, respectively, for the services of Hallmark Senior Housing, Inc., a
related entity, to handle analysis of real estate owned and options available.

15.      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.



                                      27

<PAGE>
<PAGE>

                       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:

<TABLE>
<CAPTION>
                                             2007                              2006
                                             ----                              ----
                                  Carrying          Fair            Carrying          Fair
                                   Amount           Value            Amount           Value
                                   ------           -----            ------           -----

<C>                             <C>               <C>             <C>               <C>
Cash and Restricted Cash        $    21,000       $ 21,000        $     8,000       $  8,000
Receivables                         878,000        878,000            926,000        926,000
Accounts Payable                      9,000          9,000             12,000         12,000
Debt                             12,257,000              -         12,257,000              -
</TABLE>

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

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

<TABLE>
<CAPTION>
                                                  2007                   2006
                                                  ----                   ----
<C>                                            <C>                   <C>
Numerator:
Net (Loss)                                     $(3,727,000)          $(3,038,000)
Preferred Dividends                               (640,000)             (640,000)
                                               -----------           -----------
(Loss) Available to
  Common Shareholders                          $(4,367,000)          $(3,678,000)
                                               ===========           ===========

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                                       $(.82)                $(.69)
         Diluted                                      (.82)                 (.69)
</TABLE>

                                      28

<PAGE>
<PAGE>

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, 2007. There have been no
changes in the Company's internal control over financial reporting during the
Company's fourth fiscal quarter ending December 31, 2007, that have materially
affected, or are reasonably likely to materially affect, the Company's
internal control over financial reporting.

Management's Report on Internal Control over Financial Reporting
----------------------------------------------------------------

         Management of PGI Incorporated (the "Company") is responsible for
establishing and maintaining adequate internal control over financial
reporting, as such term is defined in Exchange Act Rule 13a-15(f). The
Company's internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of the financial statements for external purposes in
accordance with generally accepted accounting principles. The Company's
internal control over financial reporting includes those policies and
procedures that (i) pertain to the maintenance of records that, in reasonable
detail, accurately and fairly reflect the transactions and dispositions of the
assets of the Company, (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with accounting principles generally accepted in the United States
of America, and that receipts and expenditures of the Company are being made
only in accordance with authorizations of management and directors of the
Company, and (iii) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the Company's
assets that could have a material effect on the financial statements.

         Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. All internal control
systems, no matter how well designed, have inherent limitations, including the
possibility of human error and the circumvention of overriding controls.
Accordingly, even an effective system of internal control over financial
reporting can provide only reasonable assurance with respect to financial
statement preparation. Also, projections of any evaluation of effectiveness to
future periods are subject to the risk that controls may become inadequate
because of changes in conditions, or that degree of compliance with the
policies or procedures may deteriorate.


                                      29

<PAGE>
<PAGE>

Item 8A.          Controls and Procedures (continued)
-------           -----------------------------------

         Management has assessed the effectiveness of the Company's internal
control over financial reporting as of December 31, 2007, based on the
framework set forth by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on
that assessment, management concludes that, as of December 31, 2007, the
Company's internal control over financial reporting is effective.

         This annual report on Form 10-KSB does not include an attestation
report of the Company's registered public accounting firm regarding internal
control over financial reporting. Management's report was not subject to
attestation by the Company's registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
Company to provide only management's report herein.


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

         Not Applicable



                                      30

<PAGE>
<PAGE>

                                   PART III
                                   --------

Item 9.           Directors, Executive Officers, Promoters, Control Persons,
-------           ----------------------------------------------------------
                  and Corporate Governances; 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, 2008.

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

Laurence A. Schiffer           Director of the Company since April 1987;
         (age 68)              President, 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 64)              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 these two directors are also the only executive
officers of the Company; and (iv) the same person serves as the Company's
chief executive officer and chief financial officer.

                                      31

<PAGE>
<PAGE>

Section 16(a) Beneficial Ownership Reporting Compliance
-------------------------------------------------------

         The Company was not furnished any Forms 3, 4 or 5, or any amendments
thereto, during our most recent fiscal year. Accordingly, the Company is not
aware of any officer, director or beneficial owner of more than 10 percent of
the Company's registered securities that failed to file on a timely basis
Forms 3, 4 and 5 required under Section 16(a) of the Securities Exchange Act
of 1934, as amended, during fiscal year ended 2007.

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
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, and Directors Independence" 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
2007.

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

         The table below provides certain information as of March 25, 2008
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.

<TABLE>
<CAPTION>
                                                                                        Percent of Total
                                                                                        ----------------      Percent of
                                                Common              Preferred         Common     Preferred   Total Voting
                  Name                          Stock                 Stock          Stock (1)     Stock       Power (1)
                  ----                          -----                 -----          ---------     -----       ---------
<C>                                         <C>                    <C>                <C>          <C>          <C>
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%

<FN>
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.

                                      32

<PAGE>
<PAGE>

         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.
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
         shares of Common Stock). Mr. Love is an indirect owner of L-PGI and
         PGIP, LLC. See Footnote 5 above and Item 12. "Certain Relationships
         and Related Transactions, and Directors Independence" for more
         information. Accordingly, Mr. Love has shared voting and investment
         power over all of these shares.
7.       These shares are the same shares owned by L-PGI and PGIP, LLC (2,509
         shares of Common Stock). Mr. Schiffer is an indirect owner of L-PGI
         and PGIP, LLC. See Footnote 5 above and Item 12. "Certain
         Relationships and Related Transactions, and Directors Independence"
         for more information. Accordingly, Mr. Schiffer has shared voting and
         investment power over all of these shares.
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, and Directors Independence" 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
</TABLE>

         As of December 31, 2007, the Company did not have a compensation plan
under which its equity securities may be issued.

Item 12.          Certain Relationships and Related Transactions, and Directors
--------          -------------------------------------------------------------
                  Independence
                  ------------

         The Company's primary lender debt of $500,000 as of December 31,
2007, and which remained at this amount during all of fiscal year 2007, 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. There were no
principal or interest payments made during fiscal year 2007 to PGIP with
respect to this debt. See also Note 7 to the Notes to Consolidated Financial
Statements.

         As further security to the primary lender indebtedness with PGIP, a
restricted proceeds escrow was established in connection 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,

                                      33

<PAGE>
<PAGE>

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. The restricted escrow balance was $ 5,000 at both December 31,
2007 and 2006, respectively. The Company utilized $220,000 of the primary
lender restricted escrow in 2006 to invest in a short-term note with Love
Investment Company, an affiliate of L-PGI, the Company's primary preferred
shareholder, and utilized $32,000 for interest payments to PGIP on the primary
lender debt. Interest earned on the restricted cash in 2007 was $40.

         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 accrued in 2007 and
2006 and the Company made payments of $39,200 and $28,000 to LREC in 2007 and
2006 respectively, for the services described in the next paragraph. Accrued
accounting service fees were $0 and $6,000 as of December 31, 2007 and 2006,
respectively.

         The following is a list of services provided:

         1.   Maintain books of original entry;
         2.   Prepare quarterly and annual SEC filings;
         3.   Coordinate the annual audit;
         4.   Assemble information for tax filing, review reports as prepared
              by tax accountants and file same;
         5.   Track Shareholder records through transfer agent;
         6.   Maintain policies of insurance against property and liability
              exposure;
         7.   Handle 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,
2007, the book value of the Company's assets was approximately $1.7 million.
Consulting fees totaling $7,000 were accrued during 2007 and 2006,
respectively. The Company made payments of $7,000 and $11,000 in 2007 and
2006, respectively for consulting fees. As of both December 31, 2007 and 2006,
a total of $2,000, 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

                                      34

<PAGE>
<PAGE>

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 controlling general partner of
Love-1989 is Love Investment Company, which is owned by Mr. Love, Love family
members and trusts 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. 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 caused the
Company to grant a second mortgage on the remaining 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 and during December 31, 2007, Love-1989 held $796,950 in
principal amount of the Debentures with respect to which there was as of
December 31, 2007 accrued and unpaid interest in the amount of $9,182,000. In
1990, $703,050 in 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, 2007 there
was accrued and unpaid interest with respect thereto in the amount of
$7,963,000. Interest on the Debentures accrues at the rate of fourteen percent
compounded quarterly, and no interest payments were made during December 31,
2007.

         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 during and at December 31, 2007 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.

                                      35

<PAGE>
<PAGE>

         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, 2007 and
2006 was $867,000 and $873,000, respectively. Interest on such receivables was
$77,000 and $72,000 for 2007 and 2006, respectively.

         In 2007 and 2006, the Company incurred expenses totaling $1,000 and
$18,000, 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.

         Neither of the two directors of the Company is independent pursuant
to the definition of "independent director" set forth in the American Stock
Exchange Company Guide because both of them are executive officers of the
Company. The Company does not have a separate designated audit, compensation
or nominating committee or committee performing similar functions.

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, 2007 and December 31,
2006 were:

<TABLE>
<CAPTION>
                                                    2007          2006
                                                    ----          ----
<C>                                                <C>           <C>
                Audit Fees                         $31,100       $28,600
                Audit Related Fees                       0             0
                Tax Fees                             3,900         4,100
                All Other Fees                           0             0
                                                   -------       -------
                                                   $35,000       $32,700
                                                   =======       =======
</TABLE>

         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.

         The Board of Directors of the Company pre-approves all audit and
other permissible services to be provided by BKD, LLP and the estimated fees
for these services.


                                      36

<PAGE>
<PAGE>

                       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, 2008                       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.

<TABLE>
<CAPTION>
Signature                              Title                               Date

<C>                                    <C>                                 <C>
/s/ Andrew S. Love                     Chairman of the Board               March 31, 2008
-------------------------------        Secretary
Andrew S. Love


/s/ Laurence A. Schiffer               Vice Chairman of the Board,         March 31, 2008
-------------------------------        President, Principal Executive
Laurence A. Schiffer                   Officer, Principal Financial
                                       Officer, and Principal Accounting
                                       Officer
</TABLE>


                                      37

<PAGE>
<PAGE>

 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

<PAGE>
<PAGE>

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).


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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.


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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 16 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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