<PAGE> 1


                      SECURITIES AND EXCHANGE COMMISSION
                            Washington, D.C.  20549
                                ---------------
                                 FORM 10-KSB/A
(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, 1996
                               ---------------------------------------


[ ]   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
-------------------------------------------------------------------------------
           (Exact name of Registrant as specified 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)

Registrant's Telephone Number, including area code:    (314) 512-8650
                                                      ----------------
Securities registered pursuant to Section 12(b) of the Act:

                                                       Name of each Exchange
     Title of Each Class                                on which Registered
     -------------------                               ---------------------
            None                                               None
            None                                               None

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

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

         Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the Registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.

                      X  Yes         No
                    ----        ----

         Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-B is not contained herein, and will not 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 amendments to this Form 10-KSB. [ ]

         The aggregate market value of voting stock held by non-affiliates of
the registrant can not be determined.  See page 11 of Form 10-KSB/A.

         Indicate the number of shares outstanding of each of the
Registrant's classes of common stock as of March 25, 1997.

         Common Stock $.10 par value, 3,317,555 shares outstanding.

The Index to Exhibits is located on pages 42 to 45 of this report.




<PAGE> 2


<TABLE>
                      PGI INCORPORATED AND SUBSIDIARIES
                             FORM 10-KSB/A - 1996
                      Contents and Cross Reference Index
<CAPTION>

Part          Item                                                                      Form 10-KSB/A
No.           No.   Description                                                            Page No.
----          ----  -----------                                                         -------------
<S>            <C>  <C>                                                                     <C>
  I             1   Business
                      General                                                                3-4
                      Recent Developments                                                    4-10
                2   Properties                                                                10
                3   Legal Proceedings                                                         10
                4   Submission of Matters to a  Vote of Security Holders                      11

 II             5   Market for Registrant's Common Equity and
                      Related Stockholder Matters                                             11
                6   Management's Discussion and Analysis or Plan
                      of Operation                                                          11-17
                7   Report of Independent Certified Public Accountants                        18
                    Financial Statements and Supplementary Data                             19-34
                8   Disagreements on Accounting and
                    Financial Disclosure                                                      34

III             9   Directors and Executive Officers of The Registrant                      34-35
               10   Executive Compensation                                                    35
               11   Security Ownership of Certain Beneficial Owners
                      and Management                                                        35-36
               12   Certain Relationships and Related Transactions                          36-39

 IV            13   Exhibits, Financial Statement Schedules and
                      Reports on Form 8-K                                                     40

Signatures                                                                                    41

Exhibit Index                                                                               42-45

</TABLE>






<PAGE> 3

                                 PART I
                                 ------
Item 1.     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 offices are at 8120 South Suncoast Boulevard,
Homosassa, Florida 34446 and its executive offices are located at 212 S.
Central, Suite 100; St. Louis, Missouri  63105, and its telephone number is
(314) 512-8650.

      The Company was founded in 1958 to engage in the business of building
and selling homes, developing and selling homesites and selling undeveloped
or partially developed tracts of land.  Substantially all of the real estate
available for sale by the Company is situated within Sugarmill Woods in west
central Florida.

      In 1994 the Company closed a series of agreements executed in April
1994 wherein the Company sold to its primary bank lender the remainder of its
Southern Woods developed homesites inventory (approximately 72 homesites),
the remainder of the undeveloped acreage of Southern Woods (approximately 200
acres) and 162 prepaid water and sewer connections in exchange for a
reduction in the principal due to its primary bank lender, a reduction in
accrued interest due to that lender and the satisfaction of other liabilities
and additional closing costs (the "1994 Secured Lender Transaction").

      With the closing of the 1994 Secured Lender Transaction, the Company's
homesite sales efforts came to an end.  After the sale of the Southern Woods
development, the Company was left with only a few undeveloped homesites.
Accordingly, the Company believes that a discussion of its traditional core
business is no longer applicable for the reason set forth above and in the
next paragraph.  A discussion of the Company's traditional core business will
be included in future filings on Form 10-KSB if and at such time as the
Company resumes normal operations.

      During the fiscal year ended December 31, 1996, the Company's business
focus and emphasis changed substantially as it concentrated its sales and
marketing efforts almost exclusively on the disposition in bulk of its
undeveloped, platted, residential real estate.  This change was prompted by
its continuing financial difficulties due to the principal and interest owed
on its debt and managements' conclusion that a bulk sale was the best way to
reduce the Company's debt service obligations.  If the Company is successful
in its sale of this undeveloped land, its remaining inventory will consist of
undeveloped commercial property.  There can be no assurance that the Company
will be successful in its efforts to effect a bulk sale.  Assuming a bulk
sale occurs, the Company intends to decide at that point whether it will
pursue the development and sale of the commercial property in accordance with
its traditional core business plans or whether it will attempt to sell such
property in bulk.  That decision will depend, in part, on whether the Company
believes it can generate more revenue by developing and selling individual
commercial properties or by selling in bulk.



<PAGE> 4
      As of January 1, 1997 the Company employed a total of 6 persons of
which 4 are on a full-time basis.

RECENT DEVELOPMENTS

Option Agreement for Sale and Purchase

      On January 31, 1997, Sugarmill Woods, Inc., a Florida corporation and a
wholly-owned subsidiary of the Company, and Love-PGI Partners, L.P.
("L-PGI")(collectively as "Seller"), entered into an Option Agreement For
Sale and Purchase ("Sale Agreement") with The Nature Conservancy, Inc., an
unrelated nonprofit District of Columbia corporation ("Purchaser"), for the
sale of and purchase of approximately 5,240 acres of certain undeveloped real
estate located in Citrus County and Hernando County, Florida ("Property").
Approximately 4,890 acres of the Property is owned by the Company, and 350
acres is owned by L-PGI.  The Property, known as Sugarmill Woods, is located
five miles south of Homosassa Springs and 60 miles north of Tampa on U.S. 19.
U.S. 98 runs diagonally through its southern portion.  The Sugarmill Woods
area consists of rolling hills covered by cypress, oak and pine trees.
Sugarmill Woods lies within the "Nature Coast" area which offers both fresh
and salt water fishing and hunting in a state forest.  There are public
beaches, picnic areas and fishing and camping facilities in the immediate
vicinity.  Several rivers in the area provide access to the Gulf of Mexico.

      Negotiations regarding the Sale Agreement began in January of 1996
after Purchaser first contacted the Company in March of 1994 about its desire
to acquire the land. The Nature Conservancy is a 501(c)(3) corporation that is
sponsoring a conservation project for Florida's Conservation and Recreation
Land program, and often acts as an intermediary for states.  The Nature
Conservancy and the State of Florida are interested in obtaining the
Property, which is mostly an upland sand dune area, in order to preserve the
land and to protect the endangered wildlife on the land.  In addition, the
Florida Department of Forestry is contemplating incorporating the Property
into the adjacent Withlacoochee State Forest.

      The Sale Agreement is contingent upon shareholder approval.  Moreover,
the Purchaser may choose not to exercise its option under the Sale Agreement.
Purchaser paid an option payment of $100 and upon exercising the option, the
purchase price for the Property is expected to be approximately $14,759,335
payable in cash by Purchaser subject to the adjustments below. Purchaser may
assign the Sale Agreement to the State of Florida and if assigned then such
purchase price may be paid by state warrant.  Of the total purchase price,
approximately $1,220,000 is expected to be



<PAGE> 5

allocated to the approximately 350 acres of the Property being sold by L-PGI,
with the remaining $13,539,335 being allocated to the approximate 4,890 acres
being sold by the Company.  Based upon the above purchase price, the net
proceeds to the Company would be approximately $13,089,335, after payment of
approximately $450,000 of expenses related to the sale.

      The amount of the purchase price was based on a price of $2,816.43 per
acre.  The purchase price is subject to adjustments for the following: the
maximum value per acre permitted to be paid under Florida statutes, the
actual number of acres calculated after a survey, defects in title or
marketability of the Property, and any charges for cleaning up hazardous
materials.  However, if any such adjustment exceeds $100,000, Seller shall
have the right to terminate the Sale Agreement.  Notwithstanding the final
valuation of the Property by the State of Florida, the purchase price shall
not exceed $14,759,335.

      The Company shall pay for and furnish a current boundary survey of the
Property and a marketable title insurance commitment and related insurance
policy to Purchaser.

      The Company shall also pay for and furnish to Purchaser a Phase 1
environmental assessment of the Property and if such assessment recommends a
Phase 2 environmental assessment, then the Company shall pay for and furnish
such a Phase 2 environmental assessment.  If such assessments confirm the
presence of hazardous waste on the Property, then the Company may be liable
for cleanup and monitoring the hazardous waste pursuant to the terms of the
Sale Agreement.

      All real estate taxes and assessments shall be prorated between the
Seller and Purchaser to the date of closing unless the Sale Agreement is
assigned to the State of Florida and then such taxes and assessments shall be
paid by Seller at closing.

      The option shall expire May 28, 1997, if the Sale Agreement is not
assigned to the State of Florida or not approved by the State of Florida
before such date unless such date is extended.  If the purchase is approved
by the State of Florida, the option shall expire 120 days after the State of
Florida's approval of the Sale Agreement unless extended.

      Closing shall take place 15 days after the Purchaser exercises the
option unless defects in the marketability of title exist or other necessary
actions have not been taken by Seller.

      Under Florida law and the regulations of the Department of Business and
Professional Regulation, Division of Land Sales, Condominiums and Mobile
Homes ("Division"), the Company is required to report the proposed sale to
the Division for its review and approval.  The Company provided the Division
with information and supporting documentation in April 1997, but there can be
no assurance that the approval of the Division will be obtained or obtained
in a timely manner.

      The Company believes the purchase price is equitable because the
Property has been marketed locally and nationally for several years without
bona fide offers.  The Company believes the



<PAGE> 6

appraisals, as discussed below, indicate this is a fair price.  There are two
new appraisals which are only available to The Nature Conservancy and the State
of Florida at this time. The Company has been assured, however, that the
purchase price represents no less than 90% of appraised value.  The Company
believes this is the best price it will be offered for the Property, because
there are thousands of individual lots and many developments of bulk sale lots
in the same general vicinity that are available at reasonable prices.  They are
included in both golf and non-golf communities.  The cost to acquire, and
upgrade the Property would probably be much greater than purchasing existing
improved property. The past programs of the Company and other similar companies
of selling lots off premises has virtually ceased.  Therefore, owners of large
tracts must find other uses.  The sale to The Nature Conservancy is such a use.
Any interested buyer of this Property will most likely encounter the same
problems that the Company did with regard to development, platting, and
reselling the Property, including such things as environmental and
conservation laws, and the highly competitive nature of real estate sales in
Florida.  Additionally, it would be difficult to find someone to purchase the
Property in bulk and the acquirer may have a difficult time obtaining
financing given the problems past creditors of the Company had with respect
to the financing of the Property.

      In addition to the State of Florida appraisals, in September 1995, PGIP
L.L.C. ("PGIP"), the holder of the Company's "First Mortgage Indebtedness"
(as that terms is hereafter defined)  contracted for an appraisal to update a
prior appraisal conducted seven years ago on the bulk acreage owned by the
Company and of which the Property is a part.  Such updated appraisal
reflected a value of approximately $4,855 per acre.  In 1992, a predecessor
of First Union National Bank of Florida ("First Union"), the Company's former
primary bank lender, obtained an appraisal reflecting a value of
approximately $2,930 per acre, and PGIP obtained another appraisal in
September 1995, which reflected a value of approximately $2,500 per acre.
Although the Company has in prior years received other appraisals which in
some instances reflected a higher value than the value used to determine the
purchase price, the Company believes that the more recent appraisals
particularly those obtained by the State of Florida reflect a more accurate
valuation of the Property.  See "Item 12. Certain Relationships and Related
Transactions."

      The net proceeds of the sale under the Sale Agreement will be first
applied to retire all or most of the First Mortgage Indebtedness held by PGIP
on the Property owned by the Company.  See "Purchase of the Company's First
Mortgage  Indebtedness by PGIP" and "Item 12. Certain Relationships and
Related Transactions" for a discussion of PGIP's relationship with the
Company and the Company's officers and directors.

      As of March 31, 1997, the principal balance of such indebtedness was
$7,323,000 and the accrued interest with respect thereto was $2,705,000.
Approximately $685,000 will be used to pay real estate taxes (including
interest and penalties) on the Property.  Approximately $2,080,000 of the
remaining net proceeds will be used to reduce the indebtedness under the
Company's 1989 Convertible Secured Debentures and to obtain a release of the



<PAGE> 7

mortgage on a portion of the Property securing those debentures.
Approximately $700,000 will be used to establish an escrow to substitute for
a mortgage in favor of the Division of Florida Land Sales which encumbers
part of the Property in order to assure completion of certain roads on
property developed by the Company.  The establishment of the escrow will be
required in order to procure release of the aforementioned mortgage in order,
in turn, to convey good title to the Property to the Purchaser.  See "Item
12. Certain Relationships and Related Transactions."  Any remaining proceeds
will be for general corporate purposes, which may include retirement of
additional indebtedness, working capital needs, and operating obligations of
the Company.

      The payment in full of accrued interest on the principal balance of the
First Mortgage Indebtedness held by PGIP would result in an inability of the
Company to make all of the other payments described above in the amount of
approximately $825,000.  As a result, the Company has requested that PGIP
consider leaving in place part of the First Mortgage Indebtedness secured by
a first mortgage lien on the approximately 600 acres of real estate which
will continue to be owned by the Company.  This would enable the Company to
make all of the payments described above in full and, depending on the amount
of the First Mortgage Indebtedness PGIP agrees to leave in place, to provide
additional funds with which the Company can meet operating expenses and other
obligations of the Company.

      PGIP has indicated to the Company that it will entertain such request
and that when, as and if approved by the members, it will leave the debt in
place, and thereby make additional funds available to the Company, in such
amounts as may be approved by its members and subject to such other terms and
conditions as shall be determined by PGIP.  See "Summary of Purchase of the
Company's First Mortgage Indebtedness" for a discussion of the management
structure of PGIP.  That section also indicates that Love Savings Holding
Company (a savings and loan holding company ("LSHC") of which Messrs. Andrew
S. Love, Jr. and Laurence A. Schiffer are two of the directors and LSHC's
controlling shareholders) owns the majority of the limited liability company
interests in PGIP.  Accordingly, Messrs. Love and Schiffer, through PGIP,
will decide if and whether PGIP will leave in place part of the First
Mortgage Indebtedness.  Messrs. Schiffer and Love are also the Company's only
directors and executive officers.  Any remaining proceeds shall be for
general corporate purposes, which may include retirement of additional
indebtedness, working capital needs, and operating obligations of the
Company.

      The Company believes that the sale price is fair and represents the
best prospects for the Company to realize proceeds in a prompt bulk sale at a
fair level of value.  The Company has tried for many years to sell property in
bulk or in large tracts to commercial and residential developers without
success.  In addition, its program of retail lot sales had become
increasingly non-viable up until the time it was terminated.  Even if the
Company determines that retail lot sales have again become economically
viable, and it is not the view of the Company that such is the case, the
Company lacks the capital and financial resources to resume a program of
retail lot sales.  A condition of the continued forbearance by PGIP as the
holder of the first



<PAGE> 8

mortgage indebtedness, which is in default, is that the Company proceed with a
satisfactory program of land sales.  The Company believes that, not only does it
not have any other reasonable prospects to satisfy that requirement, but, the
existing Sale Agreement does not represent a distress sale in price and terms
but, rather, represents a fair result for the Company.  In addition, the Company
believes that the sale pursuant to the Sale Agreement represents the Company's
best prospect to meet its financial obligations, in addition to the first
mortgage indebtedness, and to realize a fair market value from the remaining
acreage retained by the Company.  The Company believes that, because of its
proximity to the proposed Suncoast Expressway from Tampa and the proposed
interchange between the Suncoast Highway and Highway 98, the value of the
retained acreage will be enhanced as the highway improvements near completion.

      If the proposed sale of the Property occurs, the Company's remaining
assets will consist primarily of approximately 600 acres of undeveloped
property.  The Company intends to decide after the sale whether it will
pursue the development and sale of the property in accordance with its
traditional core business plans or whether it will attempt to sell such
property in bulk.  That decision will depend, in part, on whether the Company
believes it can generate more revenue by developing and selling individual
properties or by selling in bulk.

Summary of Purchase of the Company's First Mortgage Indebtedness by PGIP

      For the past several years, First Union, the Company's former primary
bank lender, had been threatening to foreclose on substantially all of the
Company's real estate.  This would have forced a liquidation of the Company.
To prevent foreclosure, Messrs. Love and Schiffer, who control a large
portion of the voting stock through their affiliation with L-PGI and who are
the Company's only directors and executive officers, formed PGIP in August
1995 to purchase the Company's First Mortgage Indebtedness and to accept the
assignment from First Union of the first mortgage securing repayment of the
First Mortgage Indebtedness.

      On March 28, 1996, First Union assigned to PGIP all of its right, title
and interest in and to the loan documents   (i) evidencing First Union's credit
agreements with the Company, and the Company's subsidiaries, Sugarmill Woods,
Inc., Burnt Store Marina, Inc., and Gulf Coast Credit Corporation, and (ii)
securing such indebtedness with substantially all of the Company's real estate
(the "Loan Documents").  At the time of the assignment, the Company and its
subsidiaries owed First Union approximately $9,007,000 in principal and accrued
interest (the "First Mortgage Indebtedness").

      PGIP purchased the First Mortgage Indebtedness for a total purchase
price of approximately $5,548,000 (the "Purchase Price"), including amounts
paid by PGIP to First Union prior to the closing of the purchase, or
approximately 61.1% of the First Mortgage Indebtedness.  The assignment of
the Loan Documents to PGIP was pursuant to the terms and conditions of that
certain Note and Loan



<PAGE> 9

Documents Purchase Agreement dated as of October 12, 1995, by and between First
Union, PGIP and the Borrowers, as amended by letter agreements dated November
10, 1995, December 15, 1995, January 17, 1996 and February 16, 1996 and as
further amended by that certain Modification of Note and Loan Documents Purchase
Agreement dated as of March 28, 1996.

      PGIP borrowed $3,249,521 of the Purchase Price from First Union (the
"PGIP Notes").  The PGIP Notes bear interest at the prime rate as published
in the Wall Street Journal plus 1% and mature on June 1, 1997.  Interest on
the PGIP Notes is payable monthly.  As security for payment of its
obligations under the PGIP Notes, PGIP assigned back to First Union all of
its right, title and interest in and to the Loan Documents.

      While PGIP was negotiating with First Union regarding the purchase of
the First Mortgage Indebtedness, First Union and the Company entered into a
series of forbearance agreements, so that First Union would not foreclose on
the Company's real estate.  As a condition to First Union's execution of the
forbearance agreement, Purchaser paid First Union multiple nonrefundable
forbearance fees totaling $168,000 on December 31, 1995 ($273,000 as of March
28, 1996), which were applied to the purchase price of the Loan Documents.
In addition, upon execution of the Note Purchase Agreement, PGIP paid First
Union a nonrefundable initial loan purchase installment of $241,617 (the
"Initial Purchase Payment") which was applied against the Purchase Price
which was paid at closing on March 28, 1996.  The Initial Loan Purchase
Payment paid to First Union was used by First Union to pay the Company's 1993
property tax owed to Citrus and Hernando Counties, Florida.

      Although First Union would have been willing to accept repayment of a
discounted amount from the Company in exchange for cancellation of the First
Mortgage Indebtedness, the Company was unable to take advantage of this
corporate opportunity because it did not have the liquidity, borrowing power
or ability to sell equity to raise the money necessary to take advantage of
it.  That is the reason Messrs. Love and Schiffer formed PGIP to purchase the
First Mortgage Indebtedness.

      The largest investor in PGIP is Love Savings Holding Company ("LSHC")
which holds a 72% interest and is a manager of PGIP.  Andrew S. Love, Jr. and
Laurence A. Schiffer own approximately 52% of all the issued and outstanding
voting stock of LSHC and serve as the directors and officers of LSHC.
Messrs. Love, Schiffer and LSHC are the managers of PGIP.

       As the purchaser of the Loan Documents, PGIP has a first mortgage on
the part of the property owned by the Company and proposed to be sold to The
Nature Conservancy.  PGIP accepted assignment of the Loan Documents, which
were in default and with respect to which the maturity of the First Mortgage
Indebtedness had been accelerated.  The Company has been advised by PGIP that
it will be the policy of PGIP not to proceed with collection of the principal
and interest evidenced and secured by the Loan Documents so long as the
Company pursues satisfactory efforts to market and sell the property.  PGIP's
policy, but not its contractual obligation, will be to facilitate sales of
the property by agreeing to the release of property to be sold from



<PAGE> 10

the lien of the Loan Documents against payments of the net sale proceeds
therefrom, after all expenses, closing costs and the like incurred by the
Company in connection with any such sale, in a manner to be agreed upon by PGIP
and the Company.  The bulk sale of the Property to The Nature Conservancy is an
integral part of the plan by which the Company intends to repay PGIP.

      Pursuant to PGIP's operating agreement, all proceeds received from
repayment of the First Mortgage Indebtedness are to be distributed to its
members prorata with the percent of PGIP interests each owns.  Because LSHC
owns 72% of PGIP, it will be entitled to 72% of any distributions PGIP makes
to its members from proceeds of the sale to The Nature Conservancy received
from the Company.  Because Messrs. Love and Schiffer own 52% of LSHC, they
would be deemed to have "profited" by 52% of the amount that the distribution
to LSHC exceeds the amount LSHC paid for its PGIP  interests.

Item 2.     Properties
-------     ----------

      The Company's primary investments in properties relates to its
Sugarmill Woods project.  The Company generally has fee simple title to these
properties, but  substantially all of the Company's properties are encumbered
by mortgages under either its primary lender agreement or other financing
arrangements (see Item 6 and Note 10 to the consolidated financial statements
under Item 7).

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

      The Company is a party to a number of lawsuits incidental to the normal
operation of its business.  Based upon information presently available, the
Company does not believe that the resolution of any of the suits
individually, or collectively, will have a material adverse effect on its
financial position (see Note 16 of Item 7).

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

      A shareholders meeting was not held during the year 1996.  Although the
Florida Business Corporation Act and the Company's Bylaws as amended provide
for an annual meeting of stockholders, no stockholder filed an action to
compel the holding of a meeting during the year ended December 31, 1996.

                                   PART II
                                   -------

Item 5.     Market for Registrant's Common Equity and Related Stockholder
-------     -------------------------------------------------------------
            Matters
            -------

      The Company's Common Stock was traded on the American Stock Exchange,
Inc. ("AMEX") (trading symbol--PGA) until January 4, 1991 at which time the
Company consented to the removal of its Common Stock and 6% Convertible
Subordinated Debentures from the AMEX. The Company's Common Stock and
Debentures were delisted because the Company's financial condition no longer
satisfied the AMEX's listing requirements.  Subsequent to the AMEX de-listing
the Company attempted to establish relations with a brokerage firm who would
serve as a market maker for the Common Stock.  Based on information received
from The National Quotation Bureau, Inc., there have been no reported
transactions in the Company's Common



<PAGE> 11

Stock since January 29, 1991.  During the period January 1, 1991 through January
29, 1991 the high and low bid price for the Common Stock was $.03 and the high
and low offer price was $.10.  No dividends have ever been paid on the Common
Stock, and payment of dividends is restricted under the terms of the two
indentures pursuant to which the Company's outstanding debentures are issued.
As of December 31, 1996 there were 676 holders of record of the Company's Common
Stock and 453 debenture holders.

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

PRELIMINARY NOTE

      During the fiscal year ended December 31, 1996, the Company's business
focus and emphasis concentrated on sales and marketing efforts almost
exclusively on the disposition in bulk of its undeveloped, platted,
residential real estate.  This change was prompted by its continuing
financial difficulties due to the principal and interest owed on its debt and
managements' conclusion that a bulk sale was the best way to reduce the
Company's debt service obligations.  If the Company is successful in its sale
of this undeveloped land, its remaining inventory will consist of undeveloped
commercial property.  There can be no assurance that the Company will be
successful in its efforts to effect a bulk sale.  Assuming a bulk sale
occurs, the Company intends to decide at that point whether it will pursue
the development and sale of the remaining property in accordance with its
traditional core business plans or whether it will attempt to sell such
property in bulk.  That decision will depend, in part, on whether the Company
believes it can generate more revenue by developing and selling individual
commercial properties or by selling in bulk.

RESULTS OF OPERATIONS

      Revenues for the year ended December 31, 1996 decreased by $478,000 to
$483,000 compared to revenues of $961,000 for the year ended December 31,
1995.  A net loss of $2.9 million ($1.07 per share) was incurred for 1996
compared to a net loss of $2.4 million ($.93 per share) for 1995.  Included
in the 1996 and 1995 earnings per share computation is $640,000 ($.19 per
share of Common Stock) of annual cumulative preferred stock dividends in
arrears.

Real Estate Activities
----------------------

      Sales revenues by major components for real estate operations
(excluding improvement revenues related to prior sales) for the years 1996 and
1995 were:

<TABLE>
<CAPTION>

                                           1996       1995
                                           ----       ----
                                           ($ in thousands)
      <S>                                  <C>       <C>
      Homesite sales-gross                 $   -     $  44
      Acreage sales                            -        80
                                           -----     -----
                                           $   -     $ 124
                                           =====     =====
</TABLE>

      Cost by major component for real estate operations (excluding
improve costs related to prior sales) for the years 1996 and 1995 were:



<PAGE> 12

<TABLE>
<CAPTION>
                                             1996      1995
                                             ----      ----
                                            ($ in thousands)
      <S>                                    <C>       <C>
      Homesite sales-gross                   $  -      $ 56
      Acreage sales                             -         6
                                             ----      ----
                                             $  -      $ 62
                                             ====      ====
</TABLE>

      Gross  profit margins by major components for real estate operations
for the years 1996 and 1995 were:

<TABLE>
<CAPTION>
                                1996       %              1995         %
                                ----       -              ----         -
                                              ($ in thousands)
      <S>                       <C>       <C>             <C>       <C>
      Homesite sales-gross      $ -       - %             $(12)     (27.3)%
      Acreage sales               -       - %               74       92.5 %
                                ---       ---             ----      -------
                                $ -       - %             $ 62       50.0 %
</TABLE>

Home Sales
----------

      There were no home sales in 1996 and 1995.

      The Company believed economic conditions and increased competition
negatively impacted housing sales and that the Company would not experience a
substantial improvement in either home sales volume or gross profit margins.
In response to this outlook, the Board of Directors in 1994 temporarily
suspended the new home construction operation in Sugarmill Woods.


Acreage Sales
-------------

      No significant bulk sales were generated in 1996 and 1995.

      The Company intends to continue its efforts to sell a portion or all of
its remaining 4,900 acres of undeveloped platted property and 600 acres of
undeveloped commercial property.

Other Activities
----------------

      The Company's cash accounts are substantially smaller given the
decrease in operations.  Interest income in 1996 decreased by $80,000 compared
to a 1995 decrease of $104,000 from 1994.

      Changes in other income for the years 1996 and 1995 were:

<TABLE>
<CAPTION>
                                            1996              1995
                                            ----              ----
                                               ($ in thousands)
<S>                                         <C>               <C>
Commission income                           $325              $277
Timber income                                  -               138
Other income                                  71               255
                                            ----              ----
                                            $396              $670
</TABLE>

      Commission income increased by $48,000 in 1996 to $325,000 from
$277,000 in 1995.  There was no timber income in 1996 as compared to $138,000 in
1995. Other income decreased by $184,000 in 1996 to $71,000 from $255,000 in
1995. The decrease is a result of a $151,000 gain on installment sale in 1995.
There were no installment sales in 1996.



<PAGE> 13

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

      The relationship of selling expenses and real estate sales was as
follows:

<TABLE>
<CAPTION>
                                                  1996              1995
                                                  ----              ----
                                                     ($ in thousands)
      <S>                                         <C>               <C>
      Selling expenses                            $11                $39
      Selling expenses as a
         percentage of gross
         sales revenues for real
         estate operations                          -%              31.5%
</TABLE>

      Selling expenses decreased by $28,000 (71.79%) during 1996 compared to
1995 and in 1995 they decreased by $139,000 (78.18%) compared to 1994.  The
decreases are a result of the reduction in selling activity.

      The relationship of general and administrative expenses and real estate
sales was as follows:

<TABLE>
<CAPTION>
                                                  1996              1995
                                                  ----              ----
                                                     ($ in thousands)
      <S>                                         <C>              <C>
      General and administrative
         expenses                                 $843              $541
      General and administrative
         expenses as a percentage
         of gross sales revenues for
         real estate operations                      -%            436.3%
</TABLE>

      General and administrative expenses increased by $302,000 in 1996
compared to 1995 as a result of an increase in real estate taxes due to an
adverse decision from the State of Florida on an agricultural exemption
status on Citrus County unimproved land.

      In an effort to conserve cash and reduce overhead, the Company
consolidated its administrative office functions in St. Louis, Missouri in
June, 1994.  The Company has contracted out the services to Love Real Estate
Company ("LREC"), an affiliate of Love-PGI Partners, the Company's Preferred
Shareholder (see note 18), to handle the day-to-day accounting for a fee.  As
a result general and administrative expenses decreased by $539,000 (50.6%) in
1995 compared to 1994.  The decrease reflects lower costs associated with
fewer personnel required to operate the downsized Company.

      Interest expense for the two years ended December 31, 1996 was:

<TABLE>
<CAPTION>
                                                  1996              1995
                                                  ----              ----
                                                     ($ in thousands)
<S>                                              <C>               <C>
      Interest expense                           $2,512            $2,380
</TABLE>

      Interest expense in 1996 increased by $132,000 (5.55%) compared to 1995
and increased by $261,000 (12.3%) in 1995 compared to 1994 due to the Secured
Lender Transaction.

      Other expenses decreased by $369,000 (46.85%) in 1996 compared to 1995
due to changes in valuation allowances as discussed in Note 3 and decreased
by $160,000 (29.6%) in 1995 compared to 1994 due to real estate valuation
adjustments as discussed in Note 16.



<PAGE> 14

FINANCIAL CONDITION

      Assets totaled $11.3 million at December 31, 1996 compared to $11.7
million at December 31, 1995 reflecting the following changes:

<TABLE>
<CAPTION>
                                                       1996                    1995                  Inc. (Dec.)
                                                       ----                    ----                  -----------
                                                                           ($ in thousands)
      <S>                                            <C>                     <C>                       <C>
      Cash and cash equavalents                      $    12                 $    63                   $ (51)
      Restricted cash                                  1,140                   1,102                      38
      Receivables                                        344                     693                    (349)
      Land and improvement
           inventories                                 9,016                   9,031                     (15)
      Net property and equipment                          46                      81                     (35)
      Other assets                                       759                     766                     ( 7)
                                                     -------                 -------                   -----
                                                     $11,317                 $11,736                   $(419)
                                                     =======                 =======                   =====
</TABLE>

      Declining levels of business activities are reflected in declining cash
balances, which at year end 1996 and 1995 were $12,000 and $63,000,
respectively.

      Cash decreased by $51,000 to $12,000 at December 31, 1996 compared to
$63,000 at December 31, 1995.  Net cash flow provided by operations increased
by $34,000 to $64,000 for the year ended December 31, 1996 from cash provided
by operations of $30,000 for the 1995 year.

      Cash received from operations during 1996 was $959,000, a $496,000
decrease from cash received during 1995.  The majority of the decrease is
attributable to reduced principal and interest collections from real estate
sales and receivables.

      Cash expended for operations decreased by $530,000 to $895,000 during
1996 from $1.4 million in 1995, reflecting decreases in the following
classifications; payments for real estate operations ($101,000), general -
administrative ($320,000), interest payments($57,000) and other of ($52,000).

      Cash expended for operations decreased by $1.6 million to $1.4 million
during 1995 from $3.0 million in 1994, reflecting decreases in the following
classifications; payments for real estate operations ($1.7 million), land
improvements ($5,000), interest expense ($69,000) and other of ($42,000).
The increase in general and administrative ($121,000) is due to payment of
delinquent real estate taxes.

      The $399,000 and $508,000 utilized during 1996 and 1995 by financing
activities represents payments to Finova from collections on the receivables
on  real estate sold to Finova in 1988.

      The $344,000 in receivables on real estate sales at December 31, 1996
included a 1988 receivable sale with recourse to Finova Financial Services
("Finova") treated as a financing transaction for accounting purposes.  The
Company does not have receivables available for replacement and is therefore
unable to meet its recourse obligations.  However, the Company has requested
that Finova permit the Company to satisfy its replacement obligation by
canceling or foreclosing the delinquent accounts and reselling the property
for the lender.  Finova has not yet responded to this request, and the
Company has no assurance that it will receive a favorable response. The
$349,000 decrease in receivables reflects the continuing paydown of the
Finova portfolio.



<PAGE> 15

      A comparison of the contracts receivable delinquency status at December
31, 1996 and 1995 follows:

<TABLE>
<CAPTION>
                                                                       December 31,           December 31,
                                                                          1996       %           1995         %
                                                                          ----       -           ----         -
                                                                                     ($ in thousands)
<S>                                                                     <C>        <C>          <C>        <C>
Current                                                                 $  272      25.3%       $  741      46.3%
                                                                        ------     -----        ------     -----
31 days to 60 days delinquent                                               42       3.9            91       5.7
61 days to 90 days delinquent                                               18       1.6            38       2.4
Over 90 days                                                               744      69.2           729      45.6
                                                                        ------     -----        ------     -----
   Total delinquency                                                       804      74.7           858      53.7
                                                                        ------     -----        ------     -----
      Total contracts                                                   $1,076     100.0%       $1,599     100.0%
                                                                        ======     =====        ======     =====
</TABLE>

      The Company has experienced a deterioration in the quality of the
contracts receivable portfolio over the past several years.  The Company
believes the deterioration is the result of the adverse publicity regarding
community developers as a result of the GDC bankruptcy, as well as the
difficulty of implementing foreign contract collection activities.

      Other assets at December 31, 1996 decreased by $7,000 compared to year
end 1995 primarily as a result of the normal amortization of prepaid
financing costs and lower prepaid expenses related to receivable exchanges.

      Liabilities were $33.8 million at December 31, 1996 compared to $31.4
million at December 31, 1995, reflecting the following changes:

<TABLE>
<CAPTION>
                                                                                                      Increase
                                                       1996                    1995                  (Decrease)
                                                       ----                    ----                  ----------
                                                                         ($ in thousands)
<S>                                                  <C>                     <C>                       <C>
Accounts payable                                     $    78                 $    91                   $  (13)
Other liabilities                                      1,428                   1,143                      285
Accrued interest                                      10,790                   8,471                    2,319
Credit agreements - primary lender                     7,307                   7,287                       20
Notes and mortgages payable                            3,667                   3,802                     (135)
Convertible subordinated debentures payable            9,059                   9,059                        -
Convertible debentures payable                         1,500                   1,500                        -
                                                     -------                 -------                   ------
                                                     $33,829                 $31,353                   $2,476
                                                     =======                 =======                   ======
</TABLE>

      The $2.3 million increase in accrued interest at December 31, 1996
compared to year end 1995 reflects changes in the following:

<TABLE>
<CAPTION>
                                                                                                      Increase
                                                       1996                    1995                  (Decrease)
                                                       ----                    ----                  ----------
                                                                        ($ in thousands)
<S>                                                  <C>                      <C>                      <C>
Primary lender                                       $ 2,461                  $1,541                   $  920
Debentures                                             6,880                   5,628                    1,252
Other                                                  1,449                   1,302                      147
                                                     -------                  ------                   ------
                                                     $10,790                  $8,471                   $2,319
                                                     =======                  ======                   ======
</TABLE>

      The increase is primarily due to the nonpayment of interest on the
company's debentures (see Note 11 to the consolidated financial statements
under Item 7).

      The $135,000 reduction in notes and mortgages payable primarily
represents normal principal reductions required to amortize the Finova



<PAGE> 16


mortgage.

      The Company's capital deficiency increased to $22.5 million at December
31, 1996 from a $19.6 million capital deficiency at December 31, 1995,
reflecting the 1996 operating loss.

      To maintain its existence during the two years ended December 31, 1996,
the Company relied upon a combination of borrowings, sales of land and
improvement inventories and contracts receivables.

      As of the date of this filing, the Company is in default of the entire
principal plus interest on its subordinated debentures payable in amounts
indicated in the following table:

<TABLE>
<CAPTION>
                                                                                         12/31/96
                                                                Principal                 Unpaid
                                                                Amount Due               Interest
                                                                ----------               --------
                                                                        ($ in thousands)
<S>                                                              <C>                     <C>
Subordinated debentures due June 1, 1991                         $ 1,034                 $   468
Subordinated debentures due May 1, 1992                            8,025                   3,808
                                                                 -------                 -------
                                                                 $ 9,059                 $ 4,276
                                                                 =======                 =======
</TABLE>

      The Company does not have funds available to make any payments of either
principal or interest on the above debentures.  If a debenture holder or
Trustee institutes action to collect on the debentures, such action could
prohibit the Company from continuing to operate in the normal course of
business (see Notes 10 and 11 to the consolidated financial statements under
Item 7).

      The Company has investigated the consequences of a bankruptcy filing and
believes that such an event is not in the best interest of either the
debenture or equity holders because a bankruptcy filing would negatively
impact the Company's business, as well as cause an acceleration of the First
Mortgage Indebtedness, Finova and secured debenture debt.  Management believes
that a bankruptcy filing would prompt all secured lenders to initiate
foreclosure proceedings.  Since Company assets are encumbered by mortgages,
the secured lenders have a perfected security interest and priority over the
unsecured debenture holders.

      In January 1997, Sugarmill Woods, Inc, the Company's wholly-owned
subsidiary, and Love-PGI Partners, L.P. ("L-PGI") entered into a Sale
Agreement with The Nature Conservancy, Inc. for the sale of approximately
5,240 acres of undeveloped real estate to The Nature Conservancy.  L-PGI, a
Missouri limited partnership, is managed by the general partner, Love
Investment Company.  Andrew S. Love, Jr. is the Chairman and principal
stockholder of Love Investment Company.  Sugarmill Woods, Inc. owns 4,890
acres of the land under the Sale Agreement and L-PGI owns the remaining 350
acres. See "Item 1. Business - Recent Developments."



<PAGE> 17

Item 7.     Financial Statements and Supplementary Data
-------     -------------------------------------------

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

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

We have audited the accompanying consolidated statement of financial position
of PGI Incorporated and subsidiaries as of December 31, 1996 and 1995, 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 and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards.  Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement.  An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation.  We believe that our
audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of PGI
Incorporated and subsidiaries at December 31, 1996 and 1995, and the results
of their operations and cash flows for the years then ended in conformity with
generally accepted accounting principles.

The accompanying financial statements have been prepared assuming the Company
will continue as a going concern.  As discussed in Note 11 to the financial
statements, the Company is currently in default of certain sinking fund and
interest payments on its convertible subordinated debentures.  As discussed in
Note 2, the Company is also currently in default of interest payment on its
primary debt, as well as property taxes owed on properties serving as
collateral for this obligation.  In addition, the Company has an accumulated
deficit.  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 Notes 10 and 11.  The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.


St. Louis, Missouri                                         /s/BDO Seidman
March 4, 1997



<PAGE> 18
<TABLE>
                                          PGI INCORPORATED AND SUBSIDIARIES
                                    CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                                             DECEMBER 31, 1996 AND 1995
<CAPTION>
                        ASSETS                                                       LIABILITIES
                        ======                                                       ===========

                                    1996          1995                                             1996           1995
                                    ----          ----                                             ----           ----
<S>                            <C>           <C>            <C>                              <C>            <C>
Cash and cash equivalents      $    12,000   $    63,000    Accounts payable                 $     78,000   $     91,000

Restricted Cash (Note 4)         1,140,000     1,102,000

Receivables on real estate                                  Other liabilities
  sales - net (Note 5)             318,000       682,000      (Note 9)                          1,428,000      1,143,000

Other receivables                   26,000        11,000    Accrued interest:

Land and improvement                                             Primary lender                                1,541,000
  inventories (Note 6)           9,016,000     9,031,000                                        2,461,000

Property and equipment -                                         Debentures                     6,880,000      5,628,000
  net (Note 7)                      46,000        81,000

Other assets (Note 8)              759,000       766,000         Other                          1,449,000      1,302,000

                                                            Credit agreements -
                                                              (Note 10)

                                                                 Primary lender                 7,307,000      7,287,000

                                                                 Notes and mortgages
                                                                   payable                      3,667,000      3,802,000

                                                            Convertible debentures
                                                              payable (Note 11)                 9,059,000      9,059,000

                                                            Convertible debentures
                                                              payable (Note 12)                 1,500,000      1,500,000
                                                                                             ------------   ------------
                                                                                               33,829,000     31,353,000
                                                                                             ------------   ------------
                                                            Commitments and
                                                              contingencies (Note
                                                              17)

                                                            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;    2,000,000      2,000,000
                                                              (liquidation preference of
                                                              $4.00 per share or $8,000,000)
                                                              (Note 14)

                                                            Common stock, par value
                                                              $.10 per share; authorized
                                                              25,000,000 shares; 3,317,555
                                                              shares issued and outstanding
                                                              (Note 14)                           332,000        332,000


                                                            Paid-in capital                    13,698,000     13,698,000

                                                            Accumulated deficit               (38,542,000)   (35,647,000)
                                                                                             ------------   ------------
                                                                                              (22,512,000)   (19,617,000)
                                                                                             ------------   ------------
                               $11,317,000   $11,736,000                                     $ 11,317,000   $ 11,736,000
                               ===========   ===========                                     ============   ============


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



<PAGE> 19

<TABLE>
                                     PGI INCORPORATED AND SUBSIDIARIES
                                   CONSOLIDATED STATEMENTS OF OPERATIONS
                                   YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>
                                                                             1996                    1995
                                                                             ----                    ----
<S>                                                                      <C>                     <C>
Revenues (Note 3):
     Real estate sales                                                   $         -             $   124,000
     Interest income                                                          87,000                 167,000
     Other income                                                            396,000                 670,000
                                                                         -----------             -----------
                                                                             483,000                 961,000
                                                                         -----------             -----------

Costs and expenses:
     Cost of real estate sales                                                     -                  62,000
     Selling expenses                                                         11,000                  39,000
     General and administrative expenses (Note 17)                           843,000                 541,000
     Interest (Notes 10, 11 and 12)                                        2,512,000               2,380,000
     Other expenses (Note 3)                                                  12,000                 381,000
                                                                         -----------             -----------
                                                                           3,378,000               3,403,000
                                                                         -----------             -----------
Net loss                                                                 ($2,895,000)            ($2,442,000)
                                                                         ===========             ===========
Loss per share of common stock and common stock
     equivalents after considering preferred dividends
     of $640,000 for 1996 and 1995:

          Primary net loss per share                                          ($1.07)                ($  .93)
                                                                              ======                 =======

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



<PAGE> 20
<TABLE>
                                      PGI INCORPORATED AND SUBSIDIARIES
                                     CONSOLIDATED STATEMENTS OF CASH FLOWS
                                    YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>

                                                                                     1996                 1995
                                                                                     ----                 ----
<S>                                                                                <C>                 <C>
Cash flows from operating activities:

Cash received from operations:
     Collections from real estate sales and receivables on such sales              $ 545,000           $  852,000
     Interest on homesite and acreage contracts                                       30,000               94,000
     Collections from amenity and other operations                                   339,000              277,000
     Other interest received                                                          34,000               42,000
     Other receipts                                                                   11,000              190,000
                                                                                   ---------           ----------
                                                                                     959,000            1,455,000
                                                                                   ---------           ----------
Cash expended for operations:
     Payments to subcontractors and vendors for real estate
          operations and sale and marketing activities                                 9,000              110,000

     Payments for amenity and other operations                                       315,000              327,000
     General and administrative costs                                                352,000              672,000
     Interest paid                                                                   193,000              250,000
     Other disbursements                                                              26,000               66,000
                                                                                   ---------           ----------
                                                                                     895,000            1,425,000
                                                                                   ---------           ----------

     Net cash flow provided by operating activities                                   64,000               30,000
                                                                                   ---------           ----------

Cash flows from investing activities:
     Proceeds from fixed asset sales                                                       -                1,000
     Proceeds from expiration of cash restrictions
     Net cash flow provided by investing activities                                        -              169,000
                                                                                   ---------           ----------
                                                                                           -              170,000
                                                                                   ---------           ----------

Cash flows from financing activities:
     Proceeds from borrowings                                                        284,000              345,000
     Principal payments on debt                                                     (399,000)            (508,000)
                                                                                   ---------           ----------
     Net cash flow used in financing activities                                     (115,000)            (163,000)
                                                                                   ---------           ----------

Net increase (decrease) in cash and cash equivalents                                 (51,000)              37,000

Cash and cash equivalents at beginning of year                                        63,000               26,000
                                                                                   ---------           ----------

Cash and cash equivalents at end of year                                           $  12,000           $   63,000
                                                                                   =========           ==========

Non-cash investing activities:
    Earnings capitalized into restricted cash                                      $  38,000           $   36,000
                                                                                   =========           ==========

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



<PAGE> 21

<TABLE>
                                      PGI INCORPORATED AND SUBSIDIARIES
                               CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
                                   YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>

                                                                                 1996                    1995
                                                                                 ----                    ----
<S>                                                                           <C>                     <C>
Reconciliation of net loss to net cash provided by
     operating activities:

Net loss                                                                      $(2,895,000)            $(2,442,000)

Adjustments to reconcile net loss to net cash provided
     by operating activities:

     Depreciation and amortization                                                 31,000                  36,000
     Net allowance and valuations related to real estate sales                   (374,000)                (86,000)
     Loss on sale or disposition of property, plant & equipment                     4,000                   1,000
     Earnings capitalized into restricted cash                                    (38,000)                (36,000)

     (Increase) decrease in:
          Contracts and mortgages receivable                                      550,000                 561,000
          Other receivables                                                       (12,000)                 29,000
          Land and improvement inventories - net                                   15,000                 123,000
          Loan costs and other prepaid expenses                                     7,000                  22,000
     Increase (decrease) in:
          Accounts payable                                                        (13,000)                 12,000
          Accrued interest                                                      2,319,000               2,130,000
          Other accrued expenses                                                  471,000                (248,000)
          Deposits and advances                                                   ( 1,000)                (72,000)
                                                                              -----------             -----------
                                                                                2,959,000               2,472,000
                                                                              -----------             -----------

Net cash flow provided by operating activities                                $    64,000             $    30,000
                                                                              ===========             ===========

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



<PAGE> 22

<TABLE>
                                        PGI INCORPORATED AND SUBSIDIARIES
                                CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIENCY
                                     YEARS ENDED DECEMBER 31, 1996 AND 1995
<CAPTION>

                                         Preferred Stock                Common Stock                          Retained
                                         ---------------                ------------            Paid-In       Earnings
                                     Shares        Par Value       Shares        Par value      Capital      (Deficit)
                                     ------        ---------       ------        ---------      -------      ---------
<S>                                 <C>           <C>             <C>             <C>         <C>          <C>
Balances at
   January 1, 1995                  2,000,000     $2,000,000      3,317,555       $332,000    $13,698,000  ($33,205,000)

Net loss                                -              -              -              -             -         (2,442,000)
                                    ---------     ----------      ---------       --------    -----------  ------------
Balances at
   December 31, 1995                2,000,000     $2,000,000      3,317,555       $332,000    $13,698,000  ($35,647,000)

Net loss                                -              -              -              -             -         (2,895,000)
                                    ---------     ----------      ---------       --------    -----------  ------------

Balances at
   December 31, 1996                2,000,000     $2,000,000      3,317,555       $332,000    $13,698,000  ($38,542,000)
                                    =========     ==========      =========       ========    ===========  ============

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



<PAGE> 23

              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
intercompany 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
      ---------

      Prior to July 1992, homesites were generally sold under contracts for
deed or deed,  note and mortgage which provide for a down payment and monthly
installments, including interest, for periods up to ten years.  Prior to 1990
income from sales of homesites was recorded when minimum down payment
(including interest) and other requirements were met.  However, because of
collectibility problems with certain off-site broker/foreign sales programs,
effective January 1, 1990, the Company adopted the installment method of
profit recognition in accordance with Statement of Financial Accounting
Standard No. 66 "Accounting for Sales of Real Estate".

      Homes Units
      -----------

      Home sales are recorded at closing.

      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.

Provision for Cancellations
---------------------------

      For sales prior to January 1, 1990, the Company provided for estimated
future cancellations of receivables on real estate sales by charges to
operations based on historical collection experience and analysis of
delinquencies.  Balances related to canceled receivables are charged to the
allowance for cancellations.

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 square
footage, future improvement costs and frontage.

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

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


Per Share Data
--------------

      Primary loss per share is computed by dividing net loss, after including
dividends on the Company's preferred stock, by the average number of common
shares.  For this purpose, the Company's convertible



<PAGE> 24

debentures are not deemed to be common stock equivalents, which are only
considered when their effect is dilutive.  The average number of common shares
outstanding was 3,317,555 for 1996 and 1995.

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

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

2.    Secured Lender Transactions:
      ----------------------------

      As of December 31, 1996 the Company was in default of it primary credit
agreements with PGIP, LLC.  As of December 31, 1996, the Company was
unsuccessful in consummating a large land sale to meet its obligations and to
make any payments of either principal or interest.  On January 31, 1997, the
Company sold an option for  the  purchase  of  approximately 4,900 acres of
its Sugarmill Woods property.  The proceeds of this sale are expected to
aggregate $13,770,000 if the option is exercised.  See Note 19 to the
consolidated financial statements.

      On March 28, 1996, the Company's primary lender, First Union National
Bank of Florida, a national banking association ("First Union") assigned to
PGIP, LLC., a Missouri limited liability company ("PGIP") all of First Union's
right, title and interest in and to the documents (the "Loan Documents")
evidencing and securing its primary credit agreements with the Company and the
Company's subsidiaries, Sugarmill Woods, Inc., Burnt Store Marina, Inc. and
Gulf Coast Credit Corporation (collectively, the "Borrowers"), which credit
agreements are in default and the maturity of the indebtedness secured thereby
has been accelerated.

      The Company has been advised by PGIP that it will be the policy of PGIP
not to proceed with collection of the principal and interest evidenced and
secured by the Loan Documents so long as PGI pursues satisfactory efforts to
market and sell the Property.  PGIP's policy, but not its contractual
obligation, will be to facilitate sales of the Property by agreeing to the
release of Property to be sold from the lien of the Loan Documents against
payments of the net sale proceeds therefrom, after all expenses, closing costs
and the like incurred by PGI in connection with any such sale, in a manner to
be agreed upon by PGIP and PGI.


      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 slightly more than half of
all the issued and outstanding voting stock of LSHC.  Messrs. Love and
Schiffer serve as executive officers and directors of the Company and the
other Borrowers and the Guarantors.

      Company management has determined that the Company's primary activity
must concentrate on one goal - the sale of sufficient additional acreage as
soon as possible to again substantially reduce the primary lender debt.

      PGIP purchased the Loan Documents for a total purchase price of
approximately $5,548,000 (the "Purchase Price"), including amounts paid by
PGIP to First Union prior to the Closing Date, or approximately 61.1% of the
approximately $9,007,000 owed First Union by the Company under the Loan
Documents.  PGIP borrowed $3,249,521 of the Purchase Price from First Union
(the "Notes").  The Notes bear interest at the prime rate as published in the
Wall Street Journal plus 1% and mature on June 1, 1997.  Interest on the Notes
is payable monthly.  As security for payment of its obligations under the
Notes, PGIP assigned to First Union all of PGIP's right, title and interest in
and to the Loan Documents.

      The assignment of the Loan Documents to PGIP was pursuant to the terms
and conditions of that certain Note and Loan Documents Purchase Agreement
dated as of October 12, 1995, by and  between  First  Union,  PGIP and the
Borrowers, as amended by letter agreements dated November



<PAGE> 25
10, 1995, December 15, 1995, January 17, 1996 and February 16, 1996 and as
further amended by that certain Modification of Note and Loan Documents Purchase
Agreement dated as of the Closing Date.

3.    Real Estate Sales, Other Income and Other Expense:
      --------------------------------------------------

Real estate sales and cost of sales consisted of:
<TABLE>
<CAPTION>
                                                                             1996                   1995
                                                                             ----                   ----
<S>
Revenues:                                                                 <C>                      <C>
     Homesite sales                                                       $       -                $ 44,000
     Acreage sales                                                                -                  80,000
                                                                          ---------                --------
                                                                          $       -                $124,000
                                                                          =========                ========
Cost of Sales:
     Homesites                                                            $       -                $ 56,000
     Acreage                                                                      -                   6,000
                                                                          ---------                --------
                                                                          $       -                $ 62,000
                                                                          =========                ========
Other income consisted of:
    Commission income                                                       325,000                 277,000
    Timber income                                                                 -                 138,000
    Other income                                                             71,000                 255,000
                                                                          ---------                --------

Other expense consisted of:
    Reduction in allowance for cancellations of contracts                   396,000                 670,000
         receivable (See Quarterly Results under Note 15)                  (170,000)                      -
    Reduction in estimated recourse liability for
        receivables sold (See quarterly results under Note 15)             (185,000)                      -
    Other expenses                                                          367,000                 381,000
                                                                          ---------                --------
                                                                          $  12,000                $381,000
                                                                          =========                ========
</TABLE>

4.    Restricted Cash:
      ----------------

      Restricted cash included cash and certificates of deposit pledged to
agencies in various states and local Florida governmental units related to
land development and environmental matters, escrowed receipts related to
pledged receivables on real estate sales and the servicing of sold receivables
and, as a result of sales agreements and Company policies, customer payments
and deposits related to home site and housing contracts.

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

      Net receivables on real estate sales consisted of:

<TABLE>
<CAPTION>
                                                                            1996                    1995
                                                                            ----                    ----
<S>                                                                      <C>
Contracts receivable on homesite sales                                   $1,076,000              $1,599,000
Other                                                                        98,000                 128,000
                                                                         ----------              ----------
                                                                          1,174,000               1,727,000
Less:    Allowance for cancellations                                       (806,000)               (976,000)
         Unamortized valuation discount                                     (50,000)                (69,000)
                                                                         ----------              ----------
                                                                         $  318,000              $  682,000
                                                                         ==========              ==========
</TABLE>

<PAGE> 26

      Stated interest rates for contracts receivable on homesite sales, as
well as contracts and mortgages receivable on acreage sales, ranged up to 10%
with payment terms varying from seven to ten years.  The weighted average
interest rate for such receivables outstanding at December 31, 1996 and 1995
was 9.32% and 9.35%, respectively.

      The Company generally considers receivables on real estate sales
delinquent if the scheduled installment payment is over 30 days past due.  At
December 31, 1996 and 1995 delinquent receivables approximated $804,000 and
$858,000, respectively.

      Contracts receivable on homesite sales and contracts and mortgages
receivable on acreage sales have been discounted to yield an effective
interest rate of 14%.  Contracts receivable on homesite sales recorded under
the installment method have not been discounted.

      The estimated scheduled principal collections for receivables on real
estate sales at December 31, 1996 are:

<TABLE>
            <S>                             <C>
            1997     (Including past-       $  921,000
                     due balances)
            1998                               143,000
            1999                                40,000
            2000                                23,000
            2001                                25,000
            Thereafter                          22,000
                                            ----------
                                            $1,174,000
                                            ==========
</TABLE>

      In March 1988 the Company sold contracts receivable on homesite sales
totaling approximately $9,246,000, before consideration of a related
unamortized valuation discount of approximately $1,197,000 at the time of the
sale.  For financial reporting purposes this transaction has been treated as a
financing transaction (see Note 10), since the Company may be required to
repurchase the contracts receivable on homesite sales under conditions other
than the recourse provision of the sales agreement.  At December 31, 1996, and
1995, contracts receivable on homesite sales of approximately
$1,076,000 and $1,599,000, respectively, and related unamortized valuation
discount of approximately $50,000 and $69,000, respectively, related to this
transaction have been included in the Company's reported receivables on real
estate sales.

      At December 31, 1996, 56% of the Company's gross receivables from real
estate sales were generated by a broker in two geographic regions, certain
districts in New York City and Taiwan.  These sales were under contract for
deed with terms similar to sales to other customers.  This concentration of
credit risk has been considered by management in determining the allowance for
cancellations.

6.    Land and Improvements:
      ----------------------

      Land and improvement inventories consisted of:
<TABLE>
<CAPTION>
                                                                             1996                   1995
                                                                             ----                   ----
            <S>                                                           <C>                     <C>
            Unimproved land                                               $8,724,000              $8,724,000
            Fully improved land                                              292,000                 307,000
                                                                          ----------              ----------
                                                                          $9,016,000              $9,031,000
                                                                          ==========              ==========
</TABLE>

<PAGE> 27

7.    Property and Equipment:
      -----------------------

    Property and equipment consisted of:

<TABLE>
<CAPTION>
                                                                             1996                    1995
                                                                             ----                    ----
           <S>                                                            <C>                     <C>
           Furniture, fixtures and other equipment                        $ 363,000               $ 405,000
           Less accumulated depreciation                                   (317,000)               (324,000)
                                                                          ---------               ---------
                                                                          $  46,000               $  81,000
                                                                          =========               =========
</TABLE>

    Depreciation was:
<TABLE>
<CAPTION>
                                                                            1996                     1995
                                                                            ----                     ----
           <S>                                                             <C>                     <C>
           Charged to expense                                              $31,000                 $36,000
</TABLE>

8.
    Other assets consisted of:
<TABLE>
<CAPTION>
                                                                                      Other Assets:
                                                                                      -------------
                                                                              1996                    1995
                                                                              ----                    ----
           <S>                                                              <C>                     <C>
           Guaranteed future connections, net                               $621,000                $621,000
           Prepaid loan and debenture costs                                        -                  13,000
           Deposit with Trustee of 6-1/2% debentures                         125,000                 120,000
           Other                                                              13,000                  12,000
                                                                            --------                --------
                                                                            $759,000                $766,000
                                                                            ========                ========
</TABLE>

      The guaranteed future connections are reflected net of discount of
$274,000 and deferred gain of $101,000 in 1996 and 1995.  They represent the
amount paid for utility hookups, connections, rights and related equipment to
bring utilities into the development.  These costs are being amortized as
units are sold.

9.
    Other liabilities consisted of:
<TABLE>
<CAPTION>
                                                                                 Other Liabilities:
                                                                                 ------------------

                                                                             1996                     1995
                                                                             ----                     ----
      <S>                                                                 <C>                     <C>
      Accrued property taxes
           - current                                                      $  208,000              $   37,000
           - delinquent                                                      476,000                 249,000
      Other accrued expenses                                                 316,000                 243,000
      Deposits, advances and escrows                                         346,000                 346,000
      Estimated recourse liability for receivables sold                       66,000                 252,000
      Other                                                                   16,000                  16,000
                                                                          ----------              ----------
                                                                          $1,428,000              $1,143,000
                                                                          ==========              ==========
</TABLE>

10.   Credit Agreements - Primary Lender and Notes and Mortgages Payable:
      -------------------------------------------------------------------
<TABLE>
<CAPTION>
                                                                             1996                   1995
                                                                             ----                   ----
<S>                                                                      <C>                     <C>
Credit agreements - primary lender
  (maturing July 8, 1997, bearing interest at prime plus 5.0%):           $7,307,000             $ 7,287,000

    Notes and mortgages payable -
      $1,385,000 bearing interest at 12-1/4%,
      $1,176,000 bearing interest at prime
      plus 2%, the remainder bearing interest
      at varying rates to 23%; maturing
      through 1999                                                         3,667,000               3,802,000
                                                                         -----------             -----------
                                                                         $10,974,000             $11,089,000
                                                                         ===========             ===========
</TABLE>


<PAGE> 28

The prime rate at December 31, 1996 was 8.25%.

      At December 31, 1996 assets collateralizing the Company's credit
agreements with its primary lender and notes and mortgages payable were
carried at $10,162,000, of which $1,174,000 represented gross
receivables on real estate sales, $26,000 represented other receivables,
$8,916,000 represented land and improvement inventories, and $46,000
represented property and equipment.

      The overall weighted average interest rate for the Company's credit
agreements with its primary lender and all remaining notes and mortgages was
approximately 12.3% as of December 31, 1996 and 11.1% as of December 31, 1995.

      As discussed in Note 5, the Company's March 1988 sale of receivables on
real estate sales has been treated as a financing transaction for financial
reporting purposes since the Company may be required to repurchase these
receivables under conditions other than the recourse provision of the sales
agreement.  Principal and interest payments are recorded by the Company based
on the collections from receivables applicable to the sale and the application
of the 12 1/4% interest rate used to calculate this sale's discounted present
value.  At December 31, 1996 and 1995, the outstanding principal balance for
this financing transaction was approximately $1,385,000 and $1,783,000,
respectively, and based on estimated collections of the associated receivables
on real estate sales, full repayment should be made by 1999.

      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 it's mortgage
holders to allow the Company to sell part of it's land holdings without
requiring full payment of the secured debt.

      Scheduled payments applicable to the reduction of principal amounts of
all primary lender debt based on the terms of the Company's primary lender
credit agreements, and all other notes and mortgages payable (without giving
effect to various cross-default provisions which could, upon formal notice,
accelerate payment of substantially all of the Company's debt) will be
required approximately as follows:

<TABLE>
            <S>                                  <C>
            1997                                   9,162,000
            1998                                   1,112,000
            1999                                     700,000
                                                 -----------
                                                 $10,974,000
                                                 ===========
</TABLE>

      In March 1996, the debt with First Union, the previous primary lender,
was purchased by PGIP, LLC.  See Note 2 for the details of the transaction.

      During the fiscal year ended December 31, 1996, the Company's business
focus and emphasis changed substantially as it concentrated its   sales   and
marketing  efforts  almost  exclusively  on  the disposition in bulk of its
undeveloped, platted, residential real estate.  This change was prompted by its
continuing financial difficulties due to the principal and interest owed on
its debt and managements' realization that a bulk sale was the best way to
reduce the Company's debt service obligations.  If the Company is successful
in its sale of this undeveloped land, its remaining inventory will consist of
undeveloped commercial property.  There can be no assurance that the Company
will be successful in its efforts to effect a bulk sale.  Assuming a bulk sale
occurs, the Company intends to decide at that point whether it will pursue the
development and sale of the commercial property in accordance with its
traditional core business plans or whether it will attempt to sell such
property in bulk.  That decision will depend, in part, on whether the Company
believes it can generate more revenue by developing and selling individual
commercial properties or by selling in bulk.  (See Note 19 for a bulk sale
option sold in 1997.)



<PAGE> 29

11.   Subordinated Debentures Payable:
      --------------------------------

             Subordinated debentures payable consisted of:
<TABLE>
<CAPTION>

                                                     1996              1995
                                                     ----              ----
<S>                                               <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.

      The Company is currently in default of certain sinking fund and interest
payments on both subordinated debentures, $9,059,000 in principal plus accrued
and unpaid interest totaling $4,276,000 at December 31, 1996.

      The debentures are not collateralized and are not subordinated to each
other, but are subordinated to senior indebtedness ($12,474,000 at December
31, 1996).  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 satisfy the obligation to debenture holders, the Company has
been and intends to continue to:

-     actively seek buyers for all or a portion of the undeveloped acreage;
-     search for additional sources of equity; and
-     determine if potential merger or joint venture candidates exist.

      No assurances can be made that the Company can achieve any of the three
above alternatives.

12.   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 350 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 debentures, with a maturity of July 8,
1997 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.  Each month, to the extent
interest on the Convertible Debentures is not paid in cash, the number of
shares into which the Convertible  Debentures are convertible will increase.
If no interest is paid prior to maturity, at maturity the Convertible
Debentures purchased on July 24, 1989, will be convertible into 868,788 shares
and those purchased on September 29, 1989, will be convertible into 1,726,568
shares, or a total of 2,595,356 shares of common stock.  The debentures are
convertible into common stock at an initial conversion price of $1.72 per
share.  The conversion price may be adjusted upon the occurrence of certain
events.

      Accrued interest was $2,604,000 and $2,076,000 at December 31, 1996 and
1995, respectively.  The debentures are collateralized by a second mortgage on
an approximately 650-acre tract of land in Citrus County, Florida.

13.   Income Taxes:
      -------------

      Reconciliation of the statutory federal income tax rates, 34% for the
years ended December 31, 1996 and 1995, to the Company's effective income tax
rates follows:



<PAGE> 30

<TABLE>
<CAPTION>
                                                               1996                               1995
                                                          ($ in thousands)                  ($ in thousands)

                                                                   Percent of                       Percent of
                                                 Amount of Tax    Pre-tax Loss     Amount of Tax   Pre-tax Loss
                                                 -------------    ------------     -------------   ------------
<S>                                                  <C>             <C>               <C>            <C>
Expected tax (credit)                                $ (984)         (34.0%)           $(830)         (34.0%)
State income taxes, net of federal tax benefits        (105)          (3.6)              (89)          (3.6)
Current year unused book operating loss               1,089           37.6               919           37.6
                                                     ------          -----             -----          -----
                                                     $    -              -%            $   -              -%
                                                     ======          =====             =====          =====
</TABLE>

      At December 31, 1996, the Company had an operating loss carryforward of
approximately $34,000,000 which will expire at various dates through 2011.  In
addition, the Company had unused investment tax credits of approximately
$215,000 which will expire at varying dates through 2004.

<TABLE>
<CAPTION>
                                                                                       1996              1995
                                                                                       ----              ----
<S>                                                                                <C>                <C>
Deferred tax asset:
     Net operating loss carryover                                                  $ 12,531,000       $11,529,000
     Adjustments to reduce land to net realizable value                                  12,000            12,000
     Expenses capitalized under IRC 263(a)                                               56,000            50,000
     ITC carryforward                                                                   215,000           250,000
    Other                                                                                 2,000             3,000
    Valuation allowance                                                             (10,347,000)       (9,364,000)
                                                                                   ------------       -----------
                                                                                      2,469,000         2,480,000
Deferred tax liability:
   Basis difference of land and improvement inventories                               2,453,000         2,453,000
   Excess tax over book depreciation                                                     16,000            27,000
                                                                                   ------------       -----------
                                                                                      2,469,000         2,480,000

Net deferred tax asset                                                             $          0       $         0
                                                                                   ============       ===========
</TABLE>

14.   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 a limited partnership
("Partnership") 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, 1996
cumulative preferred dividends in arrears totaled



<PAGE> 31

$5,336,000 ($640,000 of which related to the year ended December 31, 1996).

      As of December 31, 1996, 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, 1996 the Company had reserved 6,684,341 common shares
for the conversion of debentures.

15.   Quarterly Results:
      ------------------

      Based on the prior evidence of losses ultimately being realized from
contract cancellations and accounts receivable sold with recourse, the Company
revised the process to estimate losses.  Consequently, during the fourth
quarter of 1996, the provision for cancellation of contracts receivable was
reduced by $170,000 to allow for receivable balances which are past due only.
In addition, the estimated recourse liability for receivables sold was reduced
by $85,000.  Another, similar reduction was made in a prior quarter.

16.   Commitments and Contingencies:
      ------------------------------

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

      One instance of litigation involves Sugarmill Woods, Inc. and Citrus
County Tax Collector.  In 1994, the Citrus County Tax Appraiser denied
agricultural exemption status for the undeveloped Sugarmill Woods property and
the Company was forced to sue the County to reclaim the tax benefit.  In 1995,
the Citrus County Tax Appraiser again denied agricultural exemption status for
the undeveloped Sugarmill Woods property, but was overruled by the Value
Adjustment Board.  As a result, the Tax Appraiser sued Sugarmill Woods, and
was again successful in denying the agricultural exemption for the property.
The Company has filed an appeal to reinstate the exemption.  At this time the
outcome of the appeal cannot be determined.

      The aggregate outstanding balances of receivables sold or exchanged with
recourse by the Company, not including those receivables associated with the
March 1988 financing transaction previously discussed in Notes 5 and 9,
totaled approximately $246,000 and $384,000 at December 31, 1996 and 1995,
respectively.  Based on its collection experience with such receivables, the
Company maintained an allowance at December 31, 1996 and 1995 classified in
other  liabilities, of approximately $66,000 and $252,000 respectively for the
recourse provisions related to all receivables sold.

      Under the terms of the receivables sale agreements the Company must
repurchase contracts greater than 90 days past due or exchange current
contracts owned by the Company.  The repurchase price is equal to the
outstanding principal balance of the delinquent contract plus accrued
interest.  At December 31, 1996, sold  contracts receivable greater than 90
days past due totaled approximately $66,000.  The related accrued interest is
considered immaterial.


17.   Related Party Transactions:
      ---------------------------

      On March 28, 1996, the Company's primary lender, First Union National Bank
of Florida, a national banking association ("First Union") assigned to PGIP,
LLC., a Missouri limited liability company ("PGIP") all of First Union's
right, title and interest in and to the documents (the "Loan Documents")
evidencing and securing its primary credit agreements with the Company and the
Company's subsidiaries.  See Note 2 for further details of this transaction.

      During 1995, a certified public accounting firm in which the former
President of the Company is a partner was paid for rendered services totaling
$25,000.  To conserve operating cash, the Company negotiated an agreement
whereby property was transferred at the same prices as would be paid by third
party purchasers for comparable



<PAGE> 32
property. Additional property to cover the cost of delinquent and current year
taxes, as well as transfer costs was also conveyed at the same value paid by
third party purchasers for comparable property.

      In 1994, the Company moved its administration and accounting offices to
the offices of Love Real Estate Company ("LREC").  LREC, which is an affiliate
of Love-PGI, the Company's preferred shareholder is paid a fee of $8,350 per
month 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 payroll and benefits for Sugarmill location; and
      8.    Handle day-to-day accounting requirements.

      In addition, the Company receives office space, telephone service and
computer service from LREC.

      In 1996 and 1995, an affiliate of Love-PGI, the Company's Preferred
Shareholder, Love Investment Company made  uncollateralized loans to the
Company, which at December 31, 1996 and 1995 had a total outstanding balance,
excluding accrued interest, of $325,000 and $60,000, respectively.  Interest
charged on these loans was $17,700 and $300 for 1996 and 1995 respectively.

      In September, 1995, the Company sold Promissory Notes and Mortgages with
principal balances of $180,000, to Love Real Estate Company Profit Sharing Plan
(1994), an affiliate company of Love-PGI Partners, the Company's Preferred
Shareholder.

      Pursuant to the terms of the 1987 preferred stock private placement
agreement, the Company accrued $46,000 and $49,000 in management consulting
fees during 1996 and 1995, respectively, to a company affiliated with the
Partnership's managing general partner.  Only $10,000 of these fees were paid
in 1995.  See Secured Lender Transaction under Note 2.

      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, 1996
had an outstanding balance, including accrued interest, of $357,000.  Interest
accrued on this loan was $18,000 and $19,000 for 1996 and 1995 respectively.

      In April 1985 the Company sold its former administration building,
located in Punta Gorda, Florida, to a corporation owned and operated by the
husband of the Company's former President, Secretary-Treasurer and
subsequently entered into a leaseback of a portion of the building on terms
similar to those negotiated by other tenants.  During 1995, the Company paid
$7,000 in rent, common area cost and utilities related to this leased office
space.

18.  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 Short-Term Investments:

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

Real Estate Receivables:

      The fair value of real estate receivables is estimated by discounting
the future cash flows using current rates at which similar receivables would
be made to borrowers with similar credit ratings and for the same remaining
maturities.



<PAGE> 33

Long-Term Debt:

      The fair value of the Corporation's long-term debt with its primary
lender is estimated based on the 1996 purchase price by PGIP as discussed in
Note 2.  It was not practicable to estimate the fair value of the remaining
notes payable because the other notes are in default and no basis for
estimating value by reference to quoted market prices or on current rates
offered to the Corporation for debt of the same remaining maturities.

Accounts Payable:

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

<TABLE>
<CAPTION>
                                                                Carrying                 Fair
         1996                                                    Amount                 Value
         ----                                                    ------                 -----
<S>                                                          <C>                      <C>
Cash and short-term investments                              $ 1,152,000              $1,152,000
Principal plus accrued interest
      receivable on real estate                              $   318,000                 318,000
Accounts payable                                             $    78,000              $   78,000
Long-term debt
      Primary Lender                                         $ 9,768,000              $5,548,000
      Other                                                  $22,555,000                       -
</TABLE>

19.   Subsequent Events
      -----------------

      On January 31, 1997, the Company and an unrelated, nonprofit corporation
entered into an agreement in which the corporation purchased an option to
acquire certain real estate owned by the Company.  The exclusive option is to
purchase an estimated 4,900 acres of real property located in Florida for
$2,816.43 per acre.  The aggregate purchase price based on the option price
and the estimated acres is $13,770,000.  The Corporation, at its discretion,
can exercise the option prior to May 28, 1997.

Item 8.     Disagreements on Accounting and Financial Disclosure
-------     ----------------------------------------------------

      Not Applicable.

                                    PART III
                                    --------

Item 9.     Directors and Executive Officers of the Registrant;
-------     --------------------------------------------------
            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, 1997.

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

Laurence A. Schiffer          Director of the Company since April 1987;
(age 57)                      President and Chief Executive 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.


<PAGE> 34

Andrew S. Love, Jr.           Chairman of the Company's Board of Directors
(age 53)                      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.

SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
-------------------------------------------------------

      As of March 25, 1995, the rights of the holders to convert the Preferred
Stock into Common Stock expired pursuant to the terms of the Certificate of
Designation.  The Preferred Shareholders failed to file Forms 4 to reflect the
change in beneficial ownership as a result of the expiration of such
conversion rights.

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

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

      Neither Mr. Schiffer nor Mr. Love received fees from any source directly
attributable to their services as directors of the Company during 1996.

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

      The table below provides certain information as of March 25, 1997
regarding the beneficial ownership of the Common Stock and 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 TOTAL
                             COMMON             PREFERRED                 COMMON            PREFERRED          VOTING
         NAME                STOCK                STOCK                  STOCK<F1>            STOCK           POWER<F1>
         ----                -----                -----                  ---------            -----           ---------
<S>                         <C>                 <C>                       <C>                <C>               <C>
Estate of Harold Vernon     998,777<F2><F3>            --                  30.1%                --              18.8%

Alfred M. Johns             312,401<F4>           125,000<F4>               9.4%               6.3%              8.2%

Love-PGI Partners, L.P.     385,516<F5>         1,875,000<F5>              11.6%              93.8%             42.5%

Andrew S. Love, Jr.         385,516<F6>         1,875,000<F6>              11.6%              93.8%             42.5%

Laurence A. Schiffer        385,516<F7>         1,875,000<F7>              11.6%              93.8%             42.5%

All executive officers
  and directors as
  a group (2 persons)       385,516<F8>         1,875,000<F8>              11.6%              93.8%             42.5%

<PAGE> 35
<FN>
<F1>  The above table does not include 2,595,356 shares that may be received
      upon conversion of the Company's Convertible Secured Debentures or
      2,004,382 shares related to unpaid dividends on the issued and
      outstanding shares of the Company's Preferred Stock.  The Board of
      Directors has indicated it may authorize the issuance of the additional
      Common Stock, representing the dividends on the Class A Preferred Stock
      unpaid as of April 25, 1995.  If such shares are issued, L-PGI would
      receive 1,861,069 of the shares and would control approximately 56.3% of
      the Company vote and L-PGI together with Mr. Johns would control
      approximately 64.2% of the Company vote. See Item 12. "Certain
      Relationships and Related Transactions".

<F2>  The shares of Common Stock owned by Mr. Vernon are currently in the
      possession of the Federal Deposit Insurance Corporation ("FDIC") which
      is the receiver for First American Bank and Trust, Lake Worth, Florida
      ("First American").  First American previously made a loan to Mr. Vernon
      which was secured by these shares.  The loan is in default and the
      Company understands that the FDIC has the right, pursuant to a pledge
      agreement, to vote the shares at any annual or special meeting of
      shareholders.

<F3>  Information obtained from filings made with the Securities and Exchange
      Commission.

<F4>  Sole voting and investment power over 302,401 shares of Common Stock;
      shared voting and investment power over 10,100 shares of Common Stock
      included in the table which are owned by Mr. Johns' wife; sole voting
      and investment power over the 125,000 shares of Preferred Stock.

<F5>  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.  These shares are pledged to the FDIC, as successor
      in interest to Germania Federal Savings and Loan ("Germania"), as
      security for a loan made by Germania to L-PGI.  L-PGI has the right to
      vote these shares.

<F6>  These shares are the same shares owned by L-PGI.  Mr. Love is an
      indirect owner of L-PGI.  See Footnote 5 above and Item 12. "Certain
      Relationships and Related Transactions" for more information.

<F7>  These shares are the same shares owned by L-PGI.  Mr. Schiffer is an
      indirect owner of L-PGI.  See Footnote 5 above and Item 12. "Certain
      Relationships and Related Transactions" for more information.

<F8>  These shares are the same shares reflected in Footnotes 5, 6 and 7.
      See Footnote 5 above and Item 12. "Certain Relationships and Related
      Transactions" for more information.
</TABLE>

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

      The Company, in order to conserve cash and permit management to
concentrate on achieving a sale of all or a portion of the acreage, moved its
administration and accounting offices to the offices of  LREC in St. Louis,
Missouri, in 1994.  LREC, which is an affiliate of L-PGI, one of the Company's
preferred shareholders, is located at 212 South Central Avenue, Suite 100, St.
Louis, Missouri  63105.  A fee of $8,350 per month is paid to LREC for the
following services:

      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 payroll and benefits for Sugarmill location;
      8.    Handle day-to-day accounting requirements; and
      9.    Provide telephone and computer services.


<PAGE> 36

      Although an amount is paid to LREC as reimbursement of 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 $8,350 per month 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 also entered into a
Management Consulting Agreement with LREC ("Management Agreement").  As a
consultant to the Company and in addition to the above services, LREC provides
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, 1996 the book value of the
Company's assets was approximately $11.0 million.  Consulting fees totaling
$46,000 and $49,000 were accrued during 1996 and 1995 respectively, of which
$10,000 was paid in 1995.  In July 1992 accrued management fees were reduced
by $1,042,000 as partial consideration for the conveyance by the Company of
350 acres of property to L-PGI.  Such property is part of the Property to be
sold pursuant to the Sale Agreement.  The Management Agreement will continue
in effect until terminated upon 90 days prior written notice by a majority
vote of the Company's directors who have no financial interest in LREC or in
any LREC affiliated entity.  Mr. Schiffer receives an annual salary from LREC
but none of such salary is directly allocated to management services to the
Company under the Management Agreement.

      In 1989, the Company sold an aggregate $2,282,451 of its Convertible
Secured Debentures due April 30, 1991 (the "1989 Debentures"), in a private
placement to Love-1989 Florida Partners, L.P., a limited partnership.  The
general partner of Love-1989 Florida Partners, L.P. is Love Investment
Company, which is owned by Mr. Love, Mr. Love's family members and trusts, the
Estate of Martha Love Symington and Mr. Schiffer.  The purchase by Love-1989
Florida Partners, L.P. of the 1989 Debentures was funded in part with a loan
from L-PGI.  Love-1989 Florida Partners, L.P. has since repaid the debt to
L-PGI in full, in part by transferring a portion of the 1989 Debentures held
by Love-1989 Florida Partners, L.P. to L-PGI.  In July 1992, as partial
consideration for the conveyance of 350 acres of property, the Company was
able to retire the 1989 Debentures held by L-PGI in the principal amount of
$782,000 together with $389,000 in accrued interest.  The maturity date on all
of the remaining 1989  Debentures was extended to July 8, 1997.  The 1989
Debentures are in part collateralized by a second mortgage in favor of
Love-1989 Florida Partners, L.P. on approximately 650 acres of property owned
by the Company. The 350 acres and the 650 acres referred to above are included
in the Property under option for sale.

      As of December 31, 1996, Love-1989 Florida Partners, L.P. held $796,950
principal amount of the 1989 Debentures with respect to which there was at
that date accrued and unpaid interest in the amount of $1,399,397. Pursuant to
a transfer in 1990, $703,050 principal amount of the 1989 Debentures were
transferred by Love-1989 Florida Partners, L.P. to one of its (now former)
limited partners. That former limited partner continues to hold such
debentures and as of December 31, 1996


<PAGE> 37
there was accrued and unpaid interest with respect thereto in the amount of
$1,204,777.  The Company's primary lender credit agreements held by PGIP,
however, prohibit the payment of interest on the 1989 Debentures until such
time as the primary lender loans are repaid.  Each month, to the extent
interest on the 1989 Debentures are not paid in cash, the number of shares
into which they are convertible will increase.  If no interest were paid prior
to maturity, at maturity the 1989 Debentures would be convertible into
2,595,356 shares of Common Stock. If the conversion rights of the 1989
Debentures were exercised in full, Love-1989 Florida Partners, L.P., and the
former limited partner would together directly control 61.6% of the Company's
voting stock, assuming no other conversions of convertible securities.

      In 1985, a corporation owned by Alfred M. Johns, the former chairman,
and his family made an uncollateralized loan to the Company which at December
31, 1996 had an outstanding balance, excluding accrued interest, of $176,000.

      For the past several years, First Union, the Company's former primary
bank lender, had been threatening to foreclose on substantially all of the
Company's real estate.  This would have forced a liquidation of the Company.
To prevent foreclosure, Messrs. Love and Schiffer, who control a large portion
of the voting stock through their affiliation with L-PGI and who are the
Company's only directors and executive officers, formed PGIP in August 1995 to
purchase the Company's First Mortgage Indebtedness and to accept the
assignment from First Union of the first mortgage securing repayment of the
First Mortgage Indebtedness.

      On March 28, 1996, First Union assigned to PGIP all of its right, title
and interest in and to the Loan Documents.  At the time of the assignment, the
Company and its subsidiaries owed First Union approximately $9,007,000 in
principal and accrued interest.

      PGIP purchased the First Mortgage Indebtedness for a total purchase
price of approximately $5,548,000 (previously defined as the "Purchase
Price"), including amounts paid by PGIP to First Union prior to the closing of
the purchase, or approximately 61.1% of the First Mortgage Indebtedness.  The
assignment of the Loan Documents to PGIP was pursuant to the terms and
conditions of that certain Note and Loan Documents Purchase Agreement dated as
of October 12, 1995, by and between First Union, PGIP, the Company and certain
of its subsidiaries, as amended by letter agreements dated November 10, 1995,
December 15, 1995, January 17, 1996 and February 16, 1996 and as further
amended by that certain Modification of Note and Loan Documents Purchase
Agreement dated as of March 28, 1996.

      PGIP borrowed $3,249,521 of the Purchase Price from First Union
(previously defined as the "PGIP Notes").  The PGIP Notes bear interest at the
prime rate as published in the Wall Street Journal plus 1% and matured on June
1, 1997.  Interest on the PGIP Notes is payable monthly.  As security for
payment of its obligations under the PGIP Notes, PGIP assigned back to First
Union all of its right, title and interest in and to the Loan Documents.

      While PGIP was negotiating with First Union regarding the purchase of
the First Mortgage Indebtedness, First Union and the Company entered into a
series of forbearance agreements, so that First Union would not foreclose on
the Company's real estate.  As a condition to First Union's execution of the
forbearance agreement, Purchaser paid First Union multiple nonrefundable
forbearance fees totaling $168,000 on December 31, 1995 ($273,000 as of March
28, 1996), which were applied to the purchase price of the Loan Documents.  In
addition, upon execution of the Note Purchase Agreement, PGIP paid First Union
a nonrefundable initial loan purchase installment of $241,617 (previously
defined as the "Initial Purchase Payment") which was applied against the
Purchase Price which was paid at closing on March 28, 1996.  The Initial Loan
Purchase Payment paid to First Union was used by First Union to pay the
Company's 1993 property tax owed to Citrus and Hernando Counties, Florida.


<PAGE> 38
      Although First Union would have been willing to accept repayment of a
discounted amount from the Company in exchange for cancellation of the First
Mortgage Indebtedness, the Company was unable to take advantage of this
corporate opportunity because it did not have the liquidity, borrowing power
or ability to sell equity to raise the money necessary to take advantage of
it.  That is the reason Messrs. Love and Schiffer formed PGIP to purchase the
First Mortgage Indebtedness.

      The largest investor in PGIP is LSHC which holds a 72% interest and is a
manager of PGIP.  Messrs. Andrew S. Love, Jr. and Laurence A. Schiffer own
approximately 52% of all the issued and outstanding voting stock of LSHC and
serve as the directors and officers of LSHC.  Messrs. Love, Schiffer and LSHC
are the managers of PGIP.

       As the purchaser of the Loan Documents, PGIP has a first mortgage on
the part of the Property owned by the Company and proposed to be sold to The
Nature Conservancy.  PGIP accepted assignment of the Loan Documents, which
were in default and with respect to which the maturity of the First Mortgage
Indebtedness had been accelerated.  The Company has been advised by PGIP that
it will be the policy of PGIP not to proceed with collection of the principal
and interest evidenced and secured by the Loan Documents so long as the
Company pursues satisfactory efforts to market and sell the property.  PGIP's
policy, but not its contractual obligation, will be to facilitate sales of the
property by agreeing to the release of property to be sold from the lien of
the Loan Documents against payments of the net sale proceeds therefrom, after
all expenses, closing costs and the like incurred by the Company in connection
with any such sale, in a manner to be agreed upon by PGIP and the Company.
The bulk sale of the Property to The Nature Conservancy is an integral part of
the plan by which the Company intends to repay PGIP.

      Pursuant to PGIP's operating agreement, all proceeds received from
repayment of the First Mortgage Indebtedness are to be distributed to its
members prorata with the percent of PGIP interests each owns.  Because LSHC
owns 72% of PGIP, it will be entitled to 72% of any distributions PGIP makes
to its members from proceeds of the sale to The Nature Conservancy received
from the Company.  Because Messrs. Love and Schiffer own 52% of LSHC, they
would be deemed to have "profited" by 52% of the amount that the distribution
to LSHC exceeds the amount LSHC paid for its PGIP interests.

      In January 1997, Sugarmill Woods, Inc, the Company's wholly-owned
subsidiary, and L-PGI entered into a Sale Agreement with The Nature
Conservancy for the sale of approximately 5,240 acres of undeveloped real
estate to The Nature Conservancy.  L-PGI, a Missouri limited partnership, is
managed by the general partner, Love Investment Company.  Andrew S. Love, Jr.
is the Chairman and principal stockholder of Love Investment Company.
Sugarmill Woods, Inc. owns approximately 4,890 acres of the land under the
Sale Agreement and L-PGI owns the remaining 350 acres. See "Item 1. Business -
Recent Developments."

      Messrs. Love and Schiffer have varying degrees of personal financial
stakes in the Company, Love-PGI Partners, L.P., Love-1989 Florida Partners,
L.P., Love Investment Company, Love Real Estate Company, Love Savings Holding
Company, and PGIP.

      The Company believes that the foregoing transactions were on terms
comparable to those which would have been obtained from unaffiliated persons.


<PAGE> 39

Item 13.    Exhibits, Financial Statement Schedules & Reports on Form 8-K
--------    -------------------------------------------------------------
            Form 10-KSB/A
            -------------
(a)   1.    Financial Statements                                     Page No.
              Report of Independent Accountants                         18

              Consolidated Statements of Financial Position
              December 31, 1996 and 1995                                19

              Consolidated Statements of Operations
              Years Ended December 31, 1996 and 1995                    20

              Consolidated Statements of Cash Flows Years
              Ended December 31, 1996 and 1995                         21-22

              Consolidated Statements of Stockholders'
              Deficiency years Ended December 31, 1996 and 1995         23

              Notes to Consolidated Financial Statements               24-34

(a)   2.    Exhibits
            Reference is made to the Exhibit Index contained on pages 42 to 45
            herein for a list of exhibits filed under this Item.

(b)   Reports on Form 8-K.

            None were filed in the fourth quarter of 1996.

(c)   See the Exhibit Index contained on pages 42 to 45 herein for a list of
            each management contract,  compensatory plan or arrangement
            required to be filed pursuant to Item 14(c) of this report:
            Exhibits 10.1, 10.2, and 10.5.

(d)   None


                       CONSENT OF INDEPENDENT ACCOUNTANTS

      We consent to the incorporation by reference in the registration
statement of PGI Incorporated and subsidiaries on Form S-8 (File 2-77149) of
our report dated March 4, 1997 relating to the consolidated financial
statements and financial statement schedule of PGI Incorporated and
subsidiaries which report is included in this Annual Report on Form 10-KSB/A.
Our report contains an explanatory paragraph regarding uncertainty as to the
ability of the Company to continue as a going concern.

St. Louis, Missouri
March 31, 1997    /s/BDO Seidman



<PAGE> 40

                                   SIGNATURES
                                   ----------

      Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment to Form
10-KSB to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of St. Louis, State of Missouri, on this 22nd day of
August, 1997.

                                          PGI INCORPORATED
                                          (Registrant)

                                          By:/s/Laurence A. Schiffer
                                             ----------------------------
                                          Laurence A. Schiffer, President

      Pursuant to the requirements of the Securities Exchange Act of 1934,
this Amendment to Form 10-KSB has been signed below by the following persons
in the capacities and on the dates indicated.

<TABLE>
<CAPTION>
Signature                    Title                            Date
---------                    -----                            ----
<S>                          <C>                              <C>
/s/Andrew S. Love, Jr.       Chairman of the Board            August 22, 1997
-------------------------    Secretary
Andrew S. Love, Jr.

/s/Laurence A. Schiffer      Vice Chairman of the             August 22, 1997
-------------------------    Board, President,
Laurence A. Schiffer         Principal Executive Officer,
                             Principal Financial Officer
                             and Principal Accounting Officer

</TABLE>


<PAGE> 41
<TABLE>
EXHIBIT INDEX
<C>      <S>
3.1      Articles of Incorporation (filed as Exhibit 3.1 to Registrant's Form
         10-K Annual Report for the year ended December 31, 1980 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 Articles of Incorporation effective March 13, 1990
         and July 27, 1990, dated as of November 13, 1990 (filed as Exhibit 19
         to the September 30, 1990 Form 10-Q and incorporated herein by
         reference).

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

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).


<PAGE> 42
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 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).

4.11     Eleventh Mortgage and Loan Modification 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 Registrants Form 10-K dated March 30, 1994 and incorporated
         herein by reference).

4.13     Twelfth mortgage and loan modification 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).



<PAGE> 43

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.

9.       Inapplicable.

10.1     PGI Incorporated Restated 1981 Incentive Stock Option
         Plan, as amended (filed as Exhibit 10.1 to the Original
         1987 Form 10-K and incorporated herein by reference).

10.2     PGI Incorporated 1987 Non-Qualified Stock Option and Stock
         Appreciation Rights Plan (filed as Exhibit 10.2 to the Original 1987
         Form 10-K and incorporated herein by reference).

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).

10.6     Option Agreement For Sale and Purchase dated January 31, 1997,
         between Sugarmill Woods, Inc., Love-PGI Partners, L.P., and The
         Nature Conservancy.

11.      Statements re:  Computation of Per Share Earnings, filed herein on
         page 46 of this Annual Report on Form 10-KSB/A.

12.      Inapplicable.

13.      Inapplicable.



<PAGE> 44

16.      Coopers and Lybrand's letter to the SEC dated February 9, 1995 (filed
         as Exhibit 16 to the Registrant's From 8-K dated February 9, 1995 and
         incorporated herein by reference).

18.      Inapplicable.

19.      Inapplicable.

22.      Inapplicable.

21.      Subsidiaries of the Registrant, filed herein on page 47 of this
         Annual Report on Form 10-KSB/A.

23.      Inapplicable.

27.      Financial Data Schedule.

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