<PAGE>

                   U.S SECURITIES AND EXCHANGE COMMISSION
                           Washington, D.C. 20549

                                FORM 10 - QSB
(Mark One)
         QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
 |X|     EXCHANGE ACT OF 1934

                  For the quarterly period ended   September 30, 2006
                                                 ----------------------

         TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES
 | |     EXCHANGE ACT OF 1934

         For the transition period from                 to
                                       -----------------  ------------------

         Commission File Number        1-6471
                                --------------------

         PGI INCORPORATED
         ----------------
         (Exact name of small business issuer as specified in its charter)

                        FLORIDA                                 59-0867335
         -------------------------------------             -------------------
             (State or other jurisdiction                    (I.R.S. Employer
                   of incorporation)                        Identification No.)

         212 SOUTH CENTRAL, SUITE 100, ST. LOUIS, MISSOURI  63105
         --------------------------------------------------------
         (Address of principal executive offices)

         (314) 512-8650
         --------------
         (Issuer's telephone number)

         N/A
         ---------------------------------------------------------------
         (Former Name, Former Address and Former Fiscal year, if changed
         since last report)

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

                  Yes      X       No
                      ----------      ----------

         Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).

                  Yes              No     X
                      ----------      ----------

         State the number of shares outstanding of each of the issuer's
classes of common equity, as of the latest practicable date: As of November
14, 2006, there were 5,317,758 shares of the issuer's common stock, $.10 par
value per share, outstanding.

         Transitional Small Business Disclosure Format (Check one):

                  Yes              No     X
                      ----------      ----------

                                     1

<PAGE>
<PAGE>

<TABLE>


                              PGI INCORPORATED AND SUBSIDIARIES

                                        Form 10 - QSB
                           For the Quarter Ended September 30, 2006


                                      Table of Contents
                                      -----------------
<CAPTION>
                                                                                 Form 10 - QSB
                                                                                    Page No.
                                                                                 -------------
<C>                                                                                  <C>

PART I            Financial Information

         Item 1.  Financial Statements
                  Condensed Consolidated Statements of Financial Position
                     September 30, 2006 (Unaudited) and December 31, 2005               3

                  Condensed Consolidated Statements of Operations (Unaudited)
                     Three and Nine Months Ended September 30, 2006 and 2005            4

                  Condensed Consolidated Statements of Cash Flows (Unaudited)
                     Nine Months Ended September 30, 2006 and 2005                      5

                     Notes to Consolidated Financial Statements (Unaudited)             6

         Item 2.  Management's Discussion and Analysis or
                     Plan of Operation                                                 12

         Item 3.  Controls and Procedures                                              16

PART II           Other Information


         Item 1.  Legal Proceedings                                                    17

         Item 2.  Unregistered Sales of Equity Securities and Use of Proceeds          17

         Item 3.  Defaults Upon Senior Securities                                      17

         Item 4.  Submission of Matters to a Vote of Security Holders                  17

         Item 5.  Other Information                                                    17

         Item 6.  Exhibits                                                             17

SIGNATURE                                                                              18


EXHIBIT INDEX                                                                          19
</TABLE>

                                     2

<PAGE>
<PAGE>

<TABLE>
PART I            FINANCIAL INFORMATION
         Item 1.  Financial Statements

                         PGI INCORPORATED AND SUBSIDIARIES
              CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
                                 ($ in thousands)

<CAPTION>
                                                      September 30,      December 31,
                                                           2006              2005
                                                           ----              ----
                                                       (Unaudited)
<C>                                                     <C>               <C>

ASSETS
     Cash and cash equivalents                          $      4          $    147
     Restricted cash                                           5               255
     Receivables                                             934               633
     Land and improvement inventories                        642               637
     Other assets                                            199               178
                                                        --------          --------
                                                        $  1,784          $  1,850
                                                        ========          ========

LIABILITIES
     Accounts payable & accrued expenses                $     55          $     49
     Accrued real estate taxes                                11               312
     Accrued interest:
     Primary Lender                                           22                 5
     Debentures                                           27,048            24,752
     Other                                                 2,417             2,331
Credit Agreements -
     Primary lender                                          500               500
     Notes payable                                         1,198             1,198
     Subordinated debentures payable                       9,059             9,059
     Convertible debentures payable                        1,500             1,500
                                                        --------          --------
                                                        $ 41,810          $ 39,706
                                                        --------          --------

STOCKHOLDERS' DEFICIENCY
     Preferred stock, par value $1.00 per share;
         authorized 5,000,000 shares; 2,000,000
         Class A cumulative convertible shares issued
         and outstanding; (liquidation preference of
         $8,000,000 and cumulative dividends)              2,000             2,000
     Common stock, par value $.10 per share;
         authorized  25,000,000 shares; 5,317,758
         shares issued and outstanding                       532               532
     Paid in capital                                      13,498            13,498
     Accumulated deficit                                 (56,056)          (53,886)
                                                        --------          --------
                                                         (40,026)          (37,856)
                                                        --------          --------
                                                        $  1,784          $  1,850
                                                        ========          ========

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

                                     3

<PAGE>
<PAGE>

<TABLE>
Part I   Financial Information (Continued)

                                  PGI INCORPORATED AND SUBSIDIARIES
                           CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
                               ($ in thousands, except per share data)
                                             (Unaudited)

<CAPTION>
                                       Three Months Ended                     Nine Months Ended
                                       ------------------                     -----------------
                                 September 30,      September 30,      September 30,      September 30,
                                     2006               2005               2006               2005
                                     ----               ----               ----               ----
<C>                                <C>                <C>                <C>                <C>
REVENUES
     Real Estate Sales             $      -           $      -           $     10           $    195
     Interest Income                     22                 12                 60                 30
     Other Income                       313                  -                318                192
                                   --------           --------           --------           --------
                                        335                 12                388                417
                                   --------           --------           --------           --------

COSTS AND EXPENSES
     Cost of Real Estate Sales     $      -           $      -           $      -           $     14
     Interest                           832                749              2,431              2,188
     Taxes & Assessments                  4                  2                 13                 (3)
     Consulting & Accounting             11                 11                 31                 31
     Legal & Professional                14                  2                 37                 17
     General & Administrative            13                 19                 46                 38
                                   --------           --------           --------           --------
                                        874                783              2,558              2,285
                                   --------           --------           --------           --------
NET (LOSS)                         $   (539)          $   (771)          $ (2,170)          $ (1,868)
                                   ========           ========           ========           ========
NET (LOSS) PER SHARE (*)           $   (.13)          $   (.18)          $   (.50)          $   (.44)
                                   ========           ========           ========           ========


<FN>
*    Considers the effect of cumulative preferred dividends in arrears for
     the three and nine months ended September 30, 2006 and 2005.

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


                                     4

<PAGE>
<PAGE>

<TABLE>
Part I   Financial Information (Continued)

                          PGI INCORPORATED AND SUBSIDIARIES
                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                  ($ in thousands)
                                    (Unaudited)

<CAPTION>
                                                                Nine Months Ended
                                                                -----------------
                                                          September 30,    September 30,
                                                              2006             2005
                                                              ----             ----

<C>                                                         <C>              <C>
Net cash provided by (used in) operating activities         $   (107)        $    238
                                                            --------         --------
Cash flows from investing activities:
     Proceeds from restricted cash                               252                -
     Investment in notes receivable                             (273)            (110)
     Purchases of inventory and deferred expenditures            (15)              (4)
                                                            --------         --------
     Net cash (used in) investing activities                     (36)            (114)
                                                            --------         --------

Net increase (decrease) in cash                                 (143)             124

Cash at beginning of period                                      147              201
                                                            --------         --------
Cash at end of period                                       $      4         $    325
                                                            ========         ========

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

                                     5

<PAGE>
<PAGE>


                          PGI INCORPORATED AND SUBSIDIARIES
        Notes to Condensed Consolidated Financial Statements (Unaudited)

(1)  Basis of Presentation

     The accompanying unaudited condensed consolidated financial statements
     of PGI Incorporated and its subsidiaries (the "Company") have been
     prepared in accordane with the instructions to Form 10 - QSB and
     therefore do not include all disclosures necessary for fair
     presentation of financial position, results of operations and cash
     flows in conformity with generally accepted accounting principles. The
     Company's independent accountants included an explanatory paragraph
     regarding the Company's ability to continue as a going concern in their
     opinion on the Company's condensed consolidated financial statements
     for the year ended December 31, 2005.

     The consolidated balance sheet as of December 31, 2005 has been derived
     from the audited consolidated balance sheet as of that date.

     The Company remains in default under the indentures governing its
     unsecured subordinated debentures and collateralized convertible
     debentures and in default of its primary debt obligations. (See
     Management's Discussion and Analysis or Plan of Operation and Notes 9,
     10, 11, and 16 to the Company's condensed consolidated financial
     statements for the year ended December 31, 2005, as contained in the
     Company's Annual Report on Form 10 - KSB).

     All adjustments (consisting of only normal recurring accruals)
     necessary for fair presentation of financial position, results of
     operations and cash flows have been made. The results for the nine
     months ended September 30, 2006 are not necessarily indicative of
     operations to be expected for the fiscal year ending December 31, 2006
     or any other interim period.

(2)  Per Share Data

     Basic per share amounts are computed by dividing net income (loss),
     after considering cumulative dividends in arrears on the Company's
     preferred stock, by the average number of common shares and common
     stock equivalents outstanding. For this purpose, the Company's
     cumulative convertible preferred stock and collateralized convertible
     debentures are not deemed to be common stock equivalents. The average
     number of common shares outstanding for the nine months ended September
     30, 2006 and 2005 was 5,317,758.

     Diluted per share amounts are computed by dividing net income (loss) by
     the average number of common shares outstanding, after adjusting for
     the estimated effect of the assumed conversion of all cumulative
     convertible preferred stock and collateralized convertible debentures
     into shares of common stock. For the nine months ended September 30,
     2006 and 2005, the assumed conversion of all cumulative convertible
     preferred stock and collateralized convertible debentures would have
     been anti-dilutive.

                                     6

<PAGE>
<PAGE>

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

     The following is a summary of the calculations used in computing basic
     and diluted (loss) per share for the three and nine months ended
     September 30, 2006 and 2005.

<TABLE>
<CAPTION>
                                                   Three Months Ended                     Nine Months Ended
                                                   ------------------                     -----------------
                                            September 30,       September 30,      September 30,      September 30,
                                                2006                2005               2006               2005
                                                ----                ----               ----               ----

<C>                                         <C>                 <C>                <C>                <C>
     Net (Loss)                             $   (539,000)       $   (771,000)      $ (2,170,000)      $ (1,868,000)
     Preferred Dividends                    $   (160,000)       $   (160,000)      $   (480,000)      $   (480,000)
                                            ------------        ------------       ------------       ------------
     (Loss) Available to
         Common Shareholders                $   (699,000)       $   (931,000)      $ (2,650,000)      $ (2,348,000)
                                            ============        ============       ============       ============
     Weighted Average Number
         Of Shares Outstanding                 5,317,758           5,317,758          5,317,758          5,317,758
     Basic and Diluted (Loss)
         Per Share                          $       (.13)       $       (.18)      $       (.50)            $ (.44)
</TABLE>

(3)  Statement of Cash Flows

     The Financial Accounting Standards Board issued Statement No. 95,
     "Statement of Cash Flows", which requires a statement of cash flows as
     part of a full set of financial statements. For quarterly reporting
     purposes, the Company has elected to condense the reporting of its net
     cash flows. Interest paid for the nine months ended September 30, 2006
     and 2005 was $32,000 and $41,000, respectively.

(4)  Restricted Cash

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

                                     7

<PAGE>
<PAGE>

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

(5)  Receivables
     Net receivables consisted of:

<TABLE>
<CAPTION>
                                                          September 30,    December 31,
                                                              2006             2005
                                                              ----             ----
                                                                 ($ in thousands)
<C>                                                         <C>              <C>
     Receivables on real estate sales                       $      -         $      1
     Other notes receivable - related party                      873              600
     Other interest receivable                                    61               32
                                                            --------         --------
                                                            $    934         $    633
                                                            ========         ========
</TABLE>

(6)  Land and Improvements
     Land and improvement inventories consisted of:

<TABLE>
<CAPTION>
                                                          September 30,    December 31,
                                                              2006             2005
                                                              ----             ----
                                                                 ($ in thousands)

<C>                                                         <C>              <C>
     Unimproved land                                        $    626         $    621
     Fully improved land                                          16               16
                                                            --------         --------
                                                            $    642         $    637
                                                            ========         ========
</TABLE>

(7)  Other Assets
     Other assets consisted of:

<TABLE>
<CAPTION>
                                                          September 30,    December 31,
                                                              2006             2005
                                                              ----             ----
                                                                 ($ in thousands)
<C>                                                         <C>              <C>
     Deposit with Trustee of 6-1/2% debentures              $    170         $    165
     Other                                                        29               13
                                                            --------         --------
                                                            $    199         $    178
                                                            ========         ========
</TABLE>

                                     8

<PAGE>
<PAGE>

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

(8)  Accounts Payable and Accrued Expenses Accounts payable and accrued
     expenses consisted of:

<TABLE>
<CAPTION>
                                                          September 30,    December 31,
                                                              2006             2005
                                                              ----             ----
                                                                 ($ in thousands)
<C>                                                         <C>              <C>
     Accounts payable                                       $     17         $     12
     Accrued audit & professional                                 23               31
     Accrued legal                                                 1                -
     Accrued consulting fees                                       4                6
     Accrued accounting services                                   6                -
     Accrued miscellaneous                                         4                -
                                                            --------         --------
                                                            $     55         $     49
                                                            ========         ========

     Accrued Real Estate Taxes consisted of:

     Current real estate taxes                              $     11         $      -
     Delinquent real estate taxes                                  -              312
                                                            --------         --------
                                                            $     11         $    312
                                                            ========         ========
</TABLE>

(9)  Primary Lender Credit Agreements, Notes Payable, Subordinated and
     Convertible Debentures Payable Credit agreements with the Company's
     primary lender and notes payable consisted of the following:

<TABLE>
<CAPTION>
                                                          September 30,    December 31,
                                                              2006             2005
                                                              ----             ----
                                                                 ($ in thousands)
<C>                                                         <C>              <C>
     Credit agreements - primary lender:
         (maturing June 1, 1997, bearing interest
         at prime plus 5%)                                  $    500         $    500
     Notes payable - $1,176,000
         bearing interest at prime plus 2%                     1,198            1,198
                                                            --------         --------
                                                            $  1,698         $  1,698
                                                            --------         --------
     Subordinated debentures payable:

         At 6-1/2% interest; due June 1, 1991                  1,034            1,034
         At 6% interest; due May 1, 1992                       8,025            8,025
                                                            --------         --------
                                                            $  9,059         $  9,059
                                                            --------         --------
</TABLE>


                                     9

<PAGE>
<PAGE>




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


     Collateralized convertible debentures payable:

<TABLE>
<C>                                                         <C>                  <C>
         At 14% interest; due July 8, 1997,
         convertible into shares of common stock
         at $1.72 per share                                    1,500                1,500
                                                             -------              -------
                                                             $12,257              $12,257
                                                             =======              =======
</TABLE>

(10) Real Estate Sales and Other Income
     Real Estate Sales and Cost of Sales for the three and nine months
     ended September 30, 2006 and 2005 were as follows:

<TABLE>
<CAPTION>

                                       Three Months Ended                            Nine Months Ended
                                       ------------------                            -----------------
                                        ($ in thousands)                              ($ in thousands)
                              September 30,          September 30,          September 30,          September 30,
                                  2006                   2005                   2006                   2005
                                  ----                   ----                   ----                   ----
<C>                               <C>                    <C>                    <C>                    <C>
Real Estate Sales                  $ -                    $ -                   $ 10                   $195
Cost of Sales                        -                      -                      -                     14
</TABLE>

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

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

     Other income for the nine months ended September 30, 2006 and 2005 was
     $318,000 and $192,000, respectively. Other income for the three and
     nine months ended September 30, 2006 includes $312,000 as a result of
     the reversal of accrued real estate taxes from 1997 which had been in
     litigation with Citrus County, and has been finally concluded. During
     the nine months ended September 30, 2005, the Company foreclosed on ten
     lots in Citrus County and received proceeds of $134,000 for delinquent
     receivables.

(11) Income Taxes

     At December 31, 2005, the Company had an operating loss carryforward of
     approximately $38,000,000 to reduce future taxable income. These
     operating losses expire at various dates through 2025.

                                     10

<PAGE>
<PAGE>


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

     The following summarizes the temporary differences of the Company at
     September 30, 2006 and December 31, 2005 at the current statutory rate:

<TABLE>
<CAPTION>
                                                              September 30,    December 31,
                                                                  2006             2005
                                                                  ----             ----
                                                                     ($ in thousands)
<C>                                                             <C>              <C>
     Deferred tax asset:
         Net operating loss carryforward                        $ 15,250         $ 14,729
         Adjustments to reduce land to net realizable value           12               12
         Expenses capitalized under IRC 263(a)                        56               56
         Valuation allowance                                     (15,146)         (14,625)
                                                                --------         --------
                                                                     172              172

     Deferred tax liability:
         Basis difference of land and improvement inventories        172              172
                                                                --------         --------
     Net deferred tax asset                                     $      -         $      -
                                                                ========         ========
</TABLE>

                                     11

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis or Plan of Operation

Preliminary Note

     The Company's most valuable remaining asset is a parcel of 366 acres
located in Hernando County, Florida. The Company also owns some minor
parcels of real estate which are sites scattered throughout Charlotte
County, Florida, but most of these are subject to easements which markedly
reduce their value and/or consist of wetlands of indeterminable value. As of
September 30, 2006, the Company also owns 8 single family lots, located in
Citrus County, Florida.

     The 366 acre parcel in Hernando County is difficult to value because of
uncertainty related to the possible extension of the Suncoast Expressway,
which terminates on the south side of Route 98 opposite the subject
property. Planning continues for the proposed northward continuation of the
Suncoast Expressway, with the route presently believed to be the most
probable being along the western boundary of this parcel of property.
However, until and unless the uncertainty regarding the future expansion of
the Suncoast Expressway is resolved, planning with respect to this property
is difficult.

Results of Operations

     Revenues for the first nine months of 2006 decreased by $29,000 to
$388,000 from $417,000 for the comparable 2005 period primarily as a result
of less real estate sales revenue of $185,000, offset by an increase in
other income of $126,000 as further described below. Expenses for the nine
month period ended September 30, 2006 increased by $273,000 when compared to
the same period in 2005 primarily resulting from an increase in interest
expense of $243,000. In addition, taxes and assessments increased during the
first nine months of 2006 by $16,000 compared to the same period in 2005 as
a result of a negative expense in 2005 due to the reversal of accrued taxes
on lots for which foreclosure was completed in 2005 by sales for delinquent
receivables. As a result, a net loss of $2,170,000 was incurred for the
first nine months of 2006 compared to a net loss of $1,868,000 for the first
nine months of 2005. After consideration of cumulative preferred dividends
in arrears, totaling $480,000 for each of the nine months ended September
30, 2006 and 2005, a net loss per share of $(.50) and $(.44) was reported
for the nine month periods ended September 30, 2006 and 2005, respectively.
The total cumulative preferred dividends in arrears through September 30,
2006 is $7,315,000.

     Real Estate Sales and Cost of Sales consisted of:

<TABLE>
<CAPTION>
                                       Three Months Ended                            Nine Months Ended
                                       ------------------                            -----------------
                                        ($ in thousands)                              $ in thousands)
                              September 30,          September 30,          September 30,          September 30,
                                  2006                   2005                   2006                   2005
                                  ----                   ----                   ----                   ----
<C>                               <C>                    <C>                    <C>                    <C>
Real Estate Sales                  $ -                   $  -                   $ 10                   $195
Cost of Sales                        -                      -                      -                     14
</TABLE>


                                     12

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis or Plan of Operation (continued)

     In the second quarter of 2006, the Company completed the sale of a
small piece of land at the price of $10,000. This odd remnant of a lot was
not carried for any value on the Company's books. There were no sales of
real estate in the second or third quarters of 2005.

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

     Other income for the nine months ended September 30, 2006 and 2005 was
$318,000 and $192,000, respectively. Other income for the three and nine
months ended September 30, 2006 includes $312,000 which resulted from the
reversal of accrued real estate taxes due to the ultimate conclusion of the
lawsuit in Citrus County regarding the 1997 agricultural exemption status of
the Company's undeveloped Sugarmill Woods property. The initial resolution
of this lawsuit was reported in the Form 10-QSB filed by the Company on May
13, 2005. During the nine months ended September 30, 2005, the Company
foreclosed on ten lots and received proceeds of $134,000 for delinquent
contract receivables.

     As of September 30, 2006, the Company remained in default of its
primary lender indebtedness with PGIP, LLC ("PGIP") of $500,000. PGIP holds
restricted funds of the Company pursuant to an escrow agreement whereby
funds may be disbursed (i) as requested by the Company and agreed to by
PGIP, (ii) as deemed necessary and appropriate by PGIP, to protect PGIP's
interest in the Retained Acreage (as hereinafter defined), including PGIP's
right to receive principal and interest under the note agreement securing
the remaining indebtedness, or (iii) to PGIP to pay any other obligations
owed to PGIP by the Company. The restricted escrow funds held by PGIP at
September 30, 2006 and December 31, 2005 were $5,000 and $255,000,
respectively. With the approval of PGIP, the Company utilized $252,000 of
the restricted escrow funds during the nine months ended September 30, 2006
to pay $32,000 in accrued interest to PGIP, $200,000 to invest in a short
term note with an affiliate of L-PGI, the Company's preferred shareholder,
Love Investment Company, and $20,000 for operating expenditures. The primary
parcel of real estate owned by the Company, totaling 366 acres (the
"Retained Acreage"), remains subject to the primary lender indebtedness.

     Cash used in operating activities for the nine months ended September
30, 2006 was $107,000 compared to cash provided by operating activities of
$238,000 for the comparable 2005 period, primarily as a result of the sales
of the unusual real estate parcels and the recovery of contracts receivable
during the 2005 period, both as described above, which did not occur during
the comparable period in 2006. Net cash provided by investing activities
during the nine months ended September 30, 2006 was from proceeds of
restricted cash in the amount of $252,000. Net cash used in investing
activities during the nine months ended September 30, 2006 consisted of a
$273,000 investment in a short-term note with Love Investment Company, an
affiliate of L-PGI, the Company's preferred shareholder, and $15,000 in real
estate development expenditures.

                                     13

<PAGE>
<PAGE>

                       PGI INCORPORATED AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis or Plan of Operation (continued)

Analysis of Financial Condition

     Total assets decreased by $66,000 at September 30, 2006 compared to
total assets at December 31, 2005, reflecting the following changes:

<TABLE>
<CAPTION>
                                                       September 30,        December 31,        Increase
                                                           2006                 2005           (Decrease)
                                                           ----                 ----           ----------
                                                                          ($ in thousands)
<C>                                                      <C>                  <C>               <C>
     Cash and cash equivalents                           $      4             $    147          $   (143)
     Restricted cash                                            5                  255              (250)
     Receivables                                              934                  633               301
     Land and improvement inventories                         642                  637                 5
     Other assets                                             199                  178                21
                                                         --------             --------          --------
                                                         $  1,784             $  1,850          $    (66)
                                                         ========             ========          ========
</TABLE>

     Liabilities were approximately $41.8 million at September 30, 2006
compared to approximately $39.7 million at December 31, 2005, reflecting the
following changes:

<TABLE>
<CAPTION>
                                                       September 30,        December 31,        Increase
                                                           2006                 2005           (Decrease)
                                                           ----                 ----           ----------
                                                                          ($ in thousands)
<C>                                                      <C>                  <C>               <C>
     Accounts payable & accrued expenses                 $     55             $     49          $      6
     Accrued real estate taxes                                 11                  312              (301)
     Accrued interest                                      29,487               27,088             2,399
     Credit agreements - primary lender                       500                  500                 -
     Notes                                                  1,198                1,198                 -
     Convertible subordinated
         debentures payable                                 9,059                9,059                 -
     Convertible debentures payable                         1,500                1,500                 -
                                                         --------             --------          --------
                                                         $ 41,810             $ 39,706          $  2,104
                                                         ========             ========          ========
</TABLE>

         The Company remains totally dependent upon the sale of its parcels
of property to fund its operations and debt service requirements.

                                     14

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES

Item 2. Management's Discussion and Analysis or Plan of Operation (continued)

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

<TABLE>
<CAPTION>
                                                                    September 30, 2006
                                                                    ------------------
                                                               Principal         Accrued
                                                               Amount Due        Interest
                                                               ----------        --------
                                                                     ($ in thousands)
<C>                                                             <C>              <C>
     Subordinated debentures:
     ------------------------
     At 6 1/2%, due June 1, 1991                                $  1,034         $  1,166
     At 6%, due May 1, 1992                                        8,025           11,684
                                                                --------         --------
                                                                $  9,059         $ 12,850
                                                                ========         ========

     Collateralized convertible debentures:
     --------------------------------------
     At 14%, due July 8, 1997                                   $  1,500         $ 14,198
                                                                ========         ========

     Notes Payable:
     --------------
     At prime plus 2%                                           $  1,176         $  2,417
     on-interest bearing                                              22                -
                                                                --------         --------
                                                                $  1,198         $  2,417
                                                                ========         ========

     Primary Lender:                                            $    500         $     22
     ---------------                                            ========         ========
</TABLE>

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

Forward Looking Statements
--------------------------
The discussion set forth in this Item 2, as well as other portions of this
Form 10-QSB, may contain forward-looking statements. Such statements are
based upon the information currently available to management of the Company
and management's perception thereof as of the date of the Form 10-QSB. When
used in this Form 10-QSB, words such as "anticipates," "estimates,"
"believes," "expects," and similar expressions are intended to identify
forward-looking statements. Such statements are subject to risks and
uncertainties. Actual results of the Company's operations could materially
differ from those forward-looking statements. The differences could be
caused by a number of factors or combination of factors including, but not
limited to: changes in the real estate market in Florida and the counties in
which the Company owns any property; institution of legal action by the
bondholders for collection of any amounts due under the subordinated or
convertible debentures; continued failure by governmental authorities to
make a decision with respect to the Suncoast Expressway as described under
Item 2; changes in management strategy; and other factors set forth in
reports and other documents filed by the Company with the Securities and
Exchange Commission from time to time.

                                     15

<PAGE>
<PAGE>

                      PGI INCORPORATED AND SUBSIDIARIES


Item 3. Controls and Procedures

     The Company has evaluated the effectiveness of the design and operation
of its disclosure controls and procedures under the supervision and with the
participation of its Chief Executive Officer ("CEO") and Chief Financial
Officer ("CFO"). Based on this evaluation, the Company's management,
including the CEO and CFO, concluded that the Company's disclosure controls
and procedures were effective as of September 30, 2006. There have been no
changes in the Company's internal control over financial reporting during
the quarter ended September 30, 2006 that have materially affected, or are
reasonably likely to materially affect, the Company's internal control over
financial reporting.



                                     16

<PAGE>
<PAGE>


                      PGI INCORPORATED AND SUBSIDIARIES

PART II  OTHER INFORMATION

Item 1. Legal Proceedings

        The Company is a party to routine legal proceedings incidental to
the normal operation of its business. The Company does not believe that the
resolution of any such proceedings individually, or collectively, will have
a material effect on its financial position.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

        Not applicable.

Item 3. Defaults Upon Senior Securities

        See discussion in Item 2 of Part 1 with respect to defaults on the
Company's subordinated debentures and collateralized convertible debentures
and with respect to cumulative preferred dividends in arrears, which
discussions are incorporated herein by this reference.

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

        Not applicable.

Item 5. Other Information

        Not applicable.

Item 6. Exhibits

        Reference is made to the Exhibit Index hereof for a list of exhibits
filed under this Item.

                                     17

<PAGE>
<PAGE>


                      PGI INCORPORATED AND SUBSIDIARIES

        In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

                              PGI INCORPORATED
                              ----------------
                                (Registrant)

Date: November 14, 2006                     /s/ Laurence A. Schiffer
      ---------------------                 -----------------------------------
                                            Laurence A. Schiffer
                                            President
                                            (Duly Authorized Officer, Principal
                                            Executive Officer and Principal
                                            Financial Officer)

                                     18

<PAGE>
<PAGE>

PGI INCORPORATED AND SUBSIDIARIES

EXHIBIT INDEX
-------------

2.       Inapplicable.

3.(i)    Inapplicable.

3.(ii)   Inapplicable.

4.       Inapplicable.

10.      Inapplicable.

11.      Statement re: Computation of Per Share Earnings (Set forth in Note
         2 of the Notes to Condensed Consolidated Financial Statements
         (Unaudited) herein).

15       Inapplicable.

18.      Inapplicable.

19.      Inapplicable.

20.      Inapplicable.

22.      Inapplicable.

23.      Inapplicable.

24.      Inapplicable.

31.1     Principal Executive Officer certification pursuant to Rule 13a-14(a)
         or 15d-14(a) under the Securities Exchange Act of 1934, as amended.

31.2     Principal Financial Officer certification pursuant to Rule
         13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934,
         as amended.

32.1     Chief Executive Officer certification pursuant to 18 U.S.C. Section
         1350.

32.2     Chief Financial Officer certification pursuant to 18 U.S.C. Section
         1350.

                                     19