FORM 10- Q
U.S SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
(Mark One)
 
☑
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended March 31, 2018
 
☐
TRANSITION REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from ___________________ to _____________________
 
Commission File Number 1-6471
 
PGI INCORPORATED
(Exact name of registrant as specified in its charter)
 
FLORIDA
 
59-0867335
(State or other jurisdiction of incorporation)
 
(I.R.S. Employer Identification No.)
 
212 SOUTH CENTRAL, SUITE 304, ST. LOUIS, MISSOURI 63105
(Address of principal executive offices)
 
(314) 512-8650
(Registrant’s telephone number, including area code)
 
N/A
(Former Name, Former Address and Former Fiscal year, if changed since last report)
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.Yes ☑  No ☐
 
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (Sec. 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☑ No ☐
 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
 
Large accelerated filer
☐
Accelerated filer
☐
Non-accelerated filer
☐
Smaller reporting company
☑
(Do not check if a smaller reporting company)
Emerging growth company
☐
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
 
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐  No ☑
 
Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date: As of May 11, 2018, there were 5,317,758 shares of the registrant’s common stock, $.10 par value per share, outstanding.
 

 
 
 
PGI INCORPORATED AND SUBSIDIARIES
 
Form 10 – Q
For the Quarter Ended March 31, 2018
 
Table of Contents
 
 
Page
PART I     FINANCIAL INFORMATION  
 
 
Item 1. Financial Statements
 
 
 
Condensed Consolidated Statements of Financial Position March 31, 2018 (Unaudited) and December 31, 2017
3
 
 
Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, 2018 and 2017
4
 
 
Condensed Consolidated Statements of Cash Flows (Unaudited) Three Months Ended March 31, 2018 and 2017
5
 
 
Notes to Condensed Consolidated Financial Statements (Unaudited)
6
 
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
11
 
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
15
 
 
Item 4. Controls and Procedures
15
 
 
PART II     OTHER INFORMATION  
 
 
Item 1. Legal Proceedings
16
 

Item 1A. Risk Factors
16
 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
16
 
 
Item 3. Defaults Upon Senior Securities
16
 
 
Item 4. Mine Safety Disclosures
16
 
 
Item 5. Other Information
16
 
 
Item 6. Exhibits
16
 
 
SIGNATURE  
17
 
 
EXHIBIT INDEX
18
 
 
2
 
 
PART I  FINANCIAL INFORMATION
 
Item 1. Financial Statements
 
PGI INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
($ in thousands, except share and per share data)
 
 
 
March 31,
 
 
December 31,
 
 
 
2018
 
 
2017
 
 
 
(Unaudited)
 
 
 
 
ASSETS
 
 
 
 
 
 
Cash
  $ 683  
  $ 159  
Receivables-related party
    -  
    573  
Land inventory
    14  
    14  
Restricted sinking fund
    41  
    41  
Other assets
    1  
    1  
 
  $ 739  
  $ 788  
LIABILITIES
       
       
Accounts payable and accrued expenses
  $ 193  
  $ 209  
Accrued real estate taxes
    1  
    4  
Accrued interest:
       
       
Subordinated convertible debentures payable
    25,358  
    25,032  
Convertible debentures payable-related party
    52,915  
    52,915  
Notes payable
    3,237  
    3,218  
Credit agreements:
       
       
Notes payable
    1,198  
    1,198  
Subordinated convertible debentures payable
    8,472  
    8,472  
 
    91,374  
    91,048  
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 plus unpaid cumulative dividends of $14,675)
    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
    (106,665 )
    (106,290 )
 
    (90,635 )
    (90,260 )
 
  $ 739  
  $ 788  
 
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
 
 
3
 
Part I  Financial Information (Continued)
 
PGI INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share data)
(Unaudited)
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
March 31,
 
 
 
2018
 
 
2017
 
REVENUES
 
 
 
 
 
 
Interest income
  $ 1  
  $ 1  
Interest income-related party
    4  
    -  
 
    5  
    1  
COSTS AND EXPENSES
       
       
Interest
    345  
    336  
Taxes and assessments
    1  
    1  
Consulting and accounting-
       
       
related party
    9  
    10  
Legal and professional
    4  
    21  
General and administrative
    21  
    25  
 
    380  
    393  
Net Loss before income taxes
    (375 )
    (392 )
Income tax expense
    -  
    (57 )
NET LOSS
  $ (375 )
  $ (449 )
 
       
       
NET LOSS PER SHARE(*)
       
       
AVAILABLE TO COMMON
       
       
STOCKHOLDERS-Basic and diluted
  $ (0.10 )
  $ (0.11 )
 
*Considers the effect of dividends on preferred stock for the three months ended March 31, 2018 and 2017.
 
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
 
 
4
 
Part I  Financial Information (Continued)
 
PGI INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
(Unaudited)
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
March 31,
 
 
 
2018
 
 
2017
 
 
 
 
 
 
 
 
Net cash used in operating activities
  $ (36 )
  $ (64 )
Cash Flows from investing activities:
       
       
Payments received on notes receivable-related party
    560  
    -  
Net cash provided by investing activities
    560  
    -  
 
       
       
Net change in cash
    524  
    (64 )
 
       
       
Cash at beginning of period
    159  
    958  
 
       
       
Cash at end of period
  $ 683  
  $ 894  
 
See accompanying notes to Condensed Consolidated Financial Statements (unaudited).
 
 
5
 
PGI INCORPORATED AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (Unaudited)
 
(1) Basis of Presentation
 
The accompanying unaudited condensed consolidated financial statements of PGI Incorporated (“PGI”) and its subsidiaries (the “Company”) have been prepared in accordance with the instructions to Form 10 - Q and therefore do not include all disclosures necessary for fair presentation of financial position, results of operations and cash flows in conformity with generally accepted accounting principles. The Company's independent registered public accounting firm included an explanatory paragraph regarding the Company's ability to continue as a going concern in their opinion on the Company's consolidated financial statements for the year ended December 31, 2017.
 
The Company was founded in 1958, and up until the mid 1990’s was in the business of building and selling homes, developing and selling home sites and selling undeveloped or partially developed tracts of land. Over approximately the last 25 years, the Company’s business focus and emphasis changed substantially as it has concentrated its sales and marketing efforts almost exclusively on the disposition of its remaining real estate.
 
The Company’s major efforts and activities have been, and continue to be, to sell assets of the Company, to repay its indebtedness, and to pay the ordinary on-going costs of operation of the Company. The potential values of the land parcels held for sale has been difficult to assess. While the Company will seek to realize full market value for each remaining asset, the amounts realized may be at substantial variance from its present financial statement carrying value. Certain of these assets may be of so little value and marketability that the Company may elect not to pay the real estate taxes on selected parcels, which may eventually result in a defacto liquidation of such property by subjecting such property to a tax sale. In management’s judgement, the remaining assets will be insufficient to satisfy much, if any, of the outstanding indebtedness and there will be no recoveries by the shareholders. Consequently, there is substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.
 
Certain information and note disclosures normally included in the Company’s annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Form 10-K annual report for 2017 filed with the Securities and Exchange Commission.
 
The condensed consolidated statement of financial position of the Company as of December 31, 2017 has been derived from the audited consolidated statement of financial position as of that date.
 
The Company remains in default under the indentures governing its unsecured subordinated debentures. (See Management's Discussion and Analysis of Financial Condition and Results of Operations and Notes 7, 8, and 9 to the Company's consolidated financial statements for the year ended December 31, 2017, as contained in the Company's Annual Report on Form 10 - K).
 
 
6
 
PGI INCORPORATED AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
 
All adjustments (consisting of only normal recurring accruals) necessary for fair presentation of financial position, results of operations and cash flows have been made. The results for the three months ended March 31, 2018 are not necessarily indicative of operations to be expected for the fiscal year ending December 31, 2018 or any other interim period.
 
(2) Per Share Data
 
Basic per share amounts are computed by dividing net income (loss), after deducting current period dividends on the Company's preferred stock, by the weighted average number of common shares outstanding during the period. The weighted average number of common shares outstanding for the three months ended March 31, 2018 and 2017 was 5,317,758.
 
Diluted per share amounts are computed by dividing net income (loss) attributable to common shareholders by the weighted average number of common shares outstanding, after adjusting for the estimated effect of the assumed conversion of all cumulative convertible preferred stock and outstanding convertible debentures, if dilutive, into shares of common stock. For the three months ended March 31, 2018 and 2017, the assumed conversion of all outstanding convertible preferred stock and collateralized convertible debentures would have been anti-dilutive.
 
The following is a summary of the calculations used in computing basic and diluted loss per share for the three months ended March 31, 2018 and 2017.
 
 
 
Three Months Ended
 
 
 
March 31,
 
 
March 31,
 
 
 
2018
 
 
2017
 
 
 
($ in thousands,
 
 
 
except share and per share data)
 
 
 
 
 
 
 
 
Net Loss
  $ (375 )
  $ (449 )
 
       
       
Preferred dividends
    (160 )
    (160 )
 
       
       
Loss Available to
  $ (535 )
  $ (609 )
Common shareholders
       
       
 
       
       
Weighted Average Number
       
       
Of Common Shares
       
       
Outstanding
    5,317,758  
    5,317,758  
 
       
       
Basic and Diluted Loss
       
       
Per Common Share
  $ (0.10 )
  $ (0.11 )
 
 
 
7
 
PGI INCORPORATED AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
 
(3) Statement of Cash Flows
 
The Financial Accounting Standards Board Accounting Standards Codification Topic No. 230, “Statement of Cash Flows”, requires a statement of cash flows as part of a full set of financial statements. For quarterly reporting purposes, the Company has elected to condense the reporting of its net cash flows. There were no payments of interest for the three month periods ended March 31, 2018 and March 31, 2017.
 
(4) Receivables
 
Receivables consisted of:
 
 
 
March 31,
 
 
December 31,
 
 
 
2018
 
 
2017
 
 
 
($ in thousands)
 
Note receivable-related party
  $ -  
  $ 560  
Interest receivable-related party
    -  
    13  
 
  $ -  
  $ 573  
 
(5)
Land Inventory
 
Land inventory consisted of
 
 
 
March 31,
 
 
December 31,
 
 
 
2018
 
 
2017
 
 
 
($ in thousands)
 
Fully improved land
  $ 14  
  $ 14  
 
       
       
 
 
8
 
 
PGI INCORPORATED AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
 
(6)
Accounts Payable and Accrued Expenses
 
Accounts payable and accrued expenses consisted of:
 
 
 
March 31,
 
 
December 31,
 
 
 
2018
 
 
2017
 
 
 
($ in thousands)
 
Accounts payable
  $ 3  
  $ 15  
Accrued audit & professional
    39  
    47  
Accrued legal
    2  
    -  
Accrued consulting fees-related party
    1  
    1  
Accrued debenture fees
    147  
    145  
Accrued miscellaneous
    1  
    1  
 
  $ 193  
  $ 209  
 
       
       
Accrued real estate taxes consisted of:
       
       
Current real estate taxes
  $ 1  
  $ 4  
 
(7)
Credit Agreements: Notes Payable and Subordinated Convertible Debentures Payable
 
Credit agreements consisted of the following:
 
 
 
March 31,
 
 
December 31,
 
 
 
2018
 
 
2017
 
 
 
($ in thousands)
 
Notes payable - $1,176,000 bearing
 
 
 
 
 
 
interest at prime plus 2%,
 
 
 
 
 
 
the remainder non-interest bearing,
 
 
 
 
 
 
all past due
  $ 1,198  
  $ 1,198  
 
       
       
Subordinated convertible debentures payable:
       
       
At 6.5% interest; due June 1991
    447  
    447  
At 6% interest; due May 1992
    8,025  
    8,025  
 
    8,472  
    8,472  
 
  $ 9,670  
  $ 9,670  
 
The Trustee of the 6.5% subordinated convertible debentures, which matured in June, 1991, with an original face amount of $1,034,000, provided notice of final distribution to holders of such debentures on September 2, 2014. In connection with such final distribution, the Trustee has maintained a debenture reserve fund with a balance of $41,000 as of March 31, 2018 and December 31, 2017, available for final distribution to holders of such debentures who surrender their respective debenture certificates.
 
 
9
 
PGI INCORPORATED AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements (continued)
 
During the three month period ended March 31, 2018 and during the year ended December 31, 2017, there were no 6.5% subordinated convertible debentures that were surrendered by their respective debenture holders and no funds were utilized from the debenture reserve account.
 
As of March 31, 2018 and December 31, 2017 the outstanding principal balance on such 6.5% subordinated convertible debentures that were not surrendered by the respective holders equals $447,000 plus accrued and unpaid interest of $853,000 and $846,000, respectively. If and when such remaining debentures are surrendered to the Trustee, the applicable portion of such principal and accrued interest will be recorded as debt and accrued interest forgiveness. As the Company has consistently stated in prior filings, the Company believes that any potential claims by the respective debenture holders on such 6.5% subordinated convertible debentures would be barred under the applicable statutes of limitations.
 
(8)
Income Taxes
 
Income tax expense of $57,000 was recognized during the three month period March 31, 2017 for the estimated 2016 Alternative Minimum Tax on the 2016 gain on sales of real estate. At December 31, 2017, the Company had an operating loss carryforward of approximately $68,129,000 available to reduce future taxable income. These operating losses expire at various dates through 2036.
 
The following summarizes the temporary differences of the Company at March 31, 2018 and December 31, 2017 at the statutory rate:        
 
 
 
March 31,
 
 
December 31,
 
 
 
2018
 
 
2017
 
 
 
($ in thousands)
 
Deferred tax asset
 
 
 
 
 
 
Net operating loss carryforward
  $ 17,042  
  $ 16,948  
Expenses capitalized under IRC 263(a)
    37  
    37  
Tax credits (AMT)
    57  
    57  
Valuation allowance
    (17,136 )
    (17,042 )
Total deferred tax asset
  $ -  
  $ -  
 
(9)
Fair Value of Financial Instruments
 
The carrying amount of the Company’s financial instruments, other than debt, approximates fair value at March 31, 2018 and December 31, 2017 because of the short maturity of those instruments. It was not practicable to estimate the fair value of the Company’s notes payable and its convertible debentures because these debts are in default causing no basis for estimating value by reference to quoted market prices or current rates offered to the Company for debt of the same remaining maturities.
 
 
10
 
PGI INCORPORATED AND SUBSIDIARIES
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
 
Preliminary Note
 
The Company’s remaining land inventory consists of 6 single family lots, an approximate 7 acre parcel and some other minor parcels of real estate consisting of easements in Citrus County Florida, which are owned through its wholly-owned subsidiary, Sugarmill Woods, Inc. (“Sugarmill Woods”). In addition, Punta Gorda Isles Sales, Inc. (“PGIS”), a wholly-owned subsidiary of the Company, owns 12 parcels of real estate in Charlotte County, Florida, which total approximates 60 acres, but these parcels have limited value because of associated developmental constraints such as wetlands, easements, and/or other obstacles to development and sale.
 
The Trustee of the 6.5% subordinated debentures, which matured in June 1991, with an original face amount of $1,034,000, provided notice of final distribution to holders of such debentures on September 2, 2014. In connection with such final distribution, the Trustee maintained a debenture reserve fund with a balance of $41,000 as of March 31, 2018 and December 31, 2017, respectively, which is available for final distribution to holders of such debentures who surrender their respective debenture certificates.
 
During the three month period ended March 31, 2018 and the year ended December 31, 2017, there were no 6.5% subordinated convertible debentures that were surrendered by their respective debenture holders and no funds were utilized from the debenture reserve account.
 
As of March 31, 2018 and December 31, 2017 the remaining outstanding principal balance on such 6.5% subordinated convertible debentures that have not been surrendered by the respective holders equals $447,000 plus accrued and unpaid interest of $853,000 and $846,000, respectively. If and when such remaining debentures are surrendered to the Trustee, the applicable portion of such principal and accrued interest will be recorded as debt and interest forgiveness. As the Company has consistently stated in prior filings, the Company believes that any potential claims by the respective debenture holders on such 6.5% subordinated convertible debentures would be barred under the applicable statutes of limitations.
 
As of March 31, 2018, the Company remained in default under its subordinated convertible debentures and notes payable, as well as the accrued interest with respect to its collateralized convertible debentures.
 
Results of Operations
 
Revenues for the three months ended March 31, 2018 increased by $4,000 when compared to the same period in 2017. Interest income of $1,000 for each of the three month periods ended March 31, 2018 and 2017 represents interest earned on the Company’s money market account. Interest income of $4,000 for the three month period ended March 31, 2018 represents related party interest on the short-term note receivable with Love Investment Company (“LIC”), the Company’s primary preferred stock shareholder. The Company received payment of the note receivable balance from LIC on March 6, 2018.
 
Expenses for the three month period ended March 31, 2018 decreased by $13,000 when compared to the same period in 2017 primarily as a result of a $17,000 decrease in legal and professional expenses due to expenses incurred during the period ended March 31, 2017 on a parcel in Citrus County requiring additional environmental remediation.
 
11
 
 
PGI INCORPORATED AND SUBSIDIARIES
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
 
Interest expense relating to the Company’s current outstanding debt, held by non-related parties, increased by $9,000 during the three month period ended March 31, 2018 compared to the same period in 2017, primarily as a result of interest accruing on past due balances which increase at various intervals throughout the year for accrued but unpaid interest.
 
Consulting and accounting expense decreased by $1,000 during the three month period ended March 31, 2018 when compared to the same period in 2017. A quarterly consulting fee is paid to Love Real Estate Company (“LREC”), an affiliate of LIC, of one-tenth of one percent of the carrying value of the Company’s assets which have decreased since the same period in 2017.
 
General and administrative expenses during the three month period ended March 31, 2018 decreased by $4,000 when compared to the same period in 2017 primarily due to tax service fees incurred during the three month period ended March 31, 2017.
 
Income tax expense of $57,000 was recognized during the three month period ended March 31, 2017 for the estimated 2016 Alternative Minimum Tax on the 2016 gain on sales of real estate.
 
The Company incurred a net loss of $375,000 during the three month period ended March 31, 2018 compared to a net loss of $449,000 for the comparable period in 2017. After deducting preferred dividends, totaling $160,000 for the three month periods ended March 31, 2018 and 2017, with respect to the Class A Preferred Stock, a net loss per share of $(.10) and $(.11) was incurred for the three month periods ended March 31, 2018 and 2017. The total cumulative preferred dividends in arrears with respect to the Class A Preferred Stock through March 31, 2018 is $14,675,000.
 
Cash Flow Analysis
 
During the three month period ended March 31, 2018, the Company’s net cash used in operating activities was $36,000 compared to $64,000 for the comparable period in 2017. Cash provided by investing activities during the three month period ended March 31, 2018 consisted of note receivable proceeds received from LIC. There were no investing activities during the three months ended March 31, 2017.
 
 
12
 
PGI INCORPORATED AND SUBSIDIARIES
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
 
Analysis of Financial Condition
 
Total assets decreased by $49,000 at March 31, 2018 compared to total assets at December 31, 2017, reflecting the following changes:
 
 
 
March 31,
 
 
December 31,
 
 
Increase
 
 
 
2018
 
 
2017
 
 
(Decrease)
 
 
 
 
 
 
($ in thousands)
 
 
 
 
Cash
  $ 683  
  $ 159  
  $ 524  
Receivables-related party
    -  
    573  
    (573 )
Land and improvement inventories
    14  
    14  
    -  
Restricted sinking fund
    41  
    41  
    -  
Other assets
    1  
    1  
    -  
 
  $ 739  
  $ 788  
  $ (49 )
 
During the three month period ended March 31, 2018, cash increased by $524,000 and receivables-related party decreased by $573,000 compared to December 31, 2017 primarily as a result of the note receivable proceeds received from LIC.
 
Liabilities were approximately $91,374,000 at March 31, 2018 compared to approximately $91,048,000 at December 31, 2017, reflecting the following changes which resulted in a decrease of $326,000 of liabilities:
 
 
 
March 31,
 
 
December 31,
 
 
Increase
 
 
 
2018
 
 
2017
 
 
(Decrease)
 
 
 
 
 
 
($ in thousands)
 
 
 
 
Accounts payable and accrued expenses
  $ 193  
  $ 209  
  $ (16 )
Accrued real estate taxes
    1  
    4  
    (3 )
Accrued interest
    81,510  
    81,165  
    345  
Credit agreements:
       
       
    -  
Notes payable
    1,198  
    1,198  
    -  
Subordinated convertible
       
       
       
   debentures payable
    8,472  
    8,472  
    -  
 
       
       
       
 
  $ 91,374  
  $ 91,048  
  $ 326  
 
During the three month period ended March 31, 2018, the amount of accounts payable and accrued expenses decreased by $16,000 primarily as a result of timing differences. Accrued real estate taxes decreased by $3,000 during the three month period ended March 31, 2018 due to the payment of previously accrued taxes. Accrued interest during the three month period ended March 31, 2018 increased by $345,000 due to the amount of interest expense for such period. During the three month period ended March 31, 2018, the Company made no interest or principal payments on its outstanding notes payable and subordinated convertible debentures.
 
 
13
 
PGI INCORPORATED AND SUBSIDIARIES
 
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
 
The Company remains in default on the entire principal amount plus interest (including certain sinking fund and interest payments with respect to the subordinated convertible debentures) of its subordinated convertible debentures and notes payable as well as the remaining accrued interest owed with respect to the collateralized convertible debentures.
 
The principal and accrued interest amounts due as of March 31, 2018 are as indicated in the following table:
 
 
 
March 31, 2018
 
 
 
Principal
 
 
Accrued
 
 
 
Amount Due
 
 
Interest
 
 
 
($ in thousands)
 
 
 
 
 
 
 
 
Subordinated convertible debentures:
 
 
 
 
 
 
At 6 1/2 %, due June 1991
  $ 447  
  $ 853  
At 6%, due May 1992
    8,025  
    24,505  
 
  $ 8,472  
  $ 25,358  
 
Collateralized convertible debentures-related party:
 
       
At 14%, due July 8, 1997
  $ -  
  $ 52,915  
 
       
       
Notes payable:
       
       
At prime plus 2%, all past due
  $ 1,176  
  $ 3,237  
Non-interest bearing
    22  
    -  
 
  $ 1,198  
  $ 3,237  
 
The Company does not have sufficient funds available (after payment of, or the reserving for the payment of, anticipated future operating expenses) to satisfy the principal or interest obligations on the above debentures and notes payable or any arrearage in preferred dividends.
 
The Company remains totally dependent upon the sale of parcels of its various remaining properties with respect to its ability to make any future debt service payments.
 
The Company’s independent registered public accounting firm included an explanatory paragraph regarding the Company’s ability to continue as a going concern in their opinion on the Company’s consolidated financial statements for the year ended December 31, 2017.
 
 
14
 
PGI INCORPORATED AND SUBSIDIARIES
 
Forward Looking Statements
 
The discussion set forth in this Item 2, as well as other portions of this Form 10-Q, may contain forward-looking statements. Such statements are based upon the information currently available to management of the Company and management’s perception thereof as of the date of the Form 10-Q. When used in this Form 10-Q, words such as “anticipates,” “estimates,” “believes,” “expects,” and similar expressions are intended to identify forward-looking statements. Such statements are subject to risks and uncertainties. Actual results of the Company’s operations could materially differ from those forward-looking statements. The differences could be caused by a number of factors or combination of factors including, but not limited to: changes in the real estate market in Florida and the counties in which the Company owns any property; institution of legal action by the bondholders for collection of any amounts due under the subordinated convertible debentures (notwithstanding the Company’s belief that at least a portion of such actions might be barred under applicable statute of limitations); changes in management strategy; and other factors set forth in reports and other documents filed by the Company with the Securities and Exchange Commission from time to time.
 
Item 3. Quantitative and Qualitative Disclosures About Market Risk
 
Not applicable.
 
Item 4. Controls and Procedures
 
The Company has evaluated the effectiveness of the design and operation of its disclosure controls and procedures under the supervision and with the participation of its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”). Based on this evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2018. There have been no changes in the Company’s internal control over financial reporting during the quarter ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.
 
 
15
 
PGI INCORPORATED AND SUBSIDIARIES
 
PART II OTHER INFORMATION
 
Item 1. Legal Proceedings
 
The Company, to its knowledge, currently is not a party to any material legal proceedings.
 
Item 1A. Risk Factors
 
Not applicable.
 
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
 
Not applicable.
 
Item 3. Defaults Upon Senior Securities
 
See discussion in Item 2 of Part I with respect to defaults under the Company's subordinated convertible debentures, collateralized convertible debentures and other indebtedness and with respect to cumulative preferred dividends in arrears, which discussions are incorporated herein by this reference.
 
Item 4. Mine Safety Disclosures
 
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 or furnished under this Item.
 
 
 
16
 
 PGI INCORPORATED AND SUBSIDIARIES
 
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
PGI INCORPORATED
 
 
(Registrant)
 
 
 
 
 
Date: May 11, 2018
By:  
/s/  Laurence A. Schiffer
 
 
 
Laurence A. Schiffer
 
 
 
President
 
 
 
(Duly Authorized Officer, Principal Executive Officer and Principal Financial Officer)
 
 
 
 
17
 
PGI INCORPORATED AND SUBSIDIARIES
 
EXHIBIT INDEX
 
2
 
Inapplicable.
 
 
 
3.(i)
 
Inapplicable.
 
 
 
 
Bylaws of PGI Incorporated and all amendments thereto.
 
 
 
4
 
Inapplicable.
 
 
 
10
 
Inapplicable.
 
 
 
11
 
Statement re: Computation of Per Share Earnings (Set forth in Note 2 of the Notes to Condensed Consolidated Financial Statements (Unaudited) herein).
 
 
 
15
 
Inapplicable.
 
 
 
18
 
Inapplicable.
 
 
 
19
 
Inapplicable.
 
 
 
22
 
Inapplicable.
 
 
 
23
 
Inapplicable.
 
 
 
24.
 
Inapplicable.
 
 
 
 
Principal Executive Officer certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.
 
 
 
 
Principal Financial Officer certification pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended.
 
 
 
 
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.
 
 
 
95
 
Inapplicable.
 
 
 
99
 
Inapplicable.
 
 
 
100
 
Inapplicable.
 
 
 
101
 
Instance Document, Schema Document, Calculation Linkbase Document, Labels Linkbase Document, Presentation Linkbase Document and Definition Linkbase Document.*
 
* Furnished with this report.
 
 
18
 
 Exhibit 3 (ii)
 
BY-LAWS
 
 
OF
 
 
PGI INCORPORATED
 
 
 
 
 
 
 
 
 
 
 
 
 
BY-LAWS
 
OF
 
PGI INCORPORATED
 
 
 
ARTICLE I
OFFICES
 
1.   Principal Office . The principal office of the corporation shall be located at such place within the State of Florida as the Board of Directors shall designate from time to time.
 
2.   Additional Offices . The corporation may also have offices and branch offices at such other places as the Board of Directors from time to time may designate or the business of the corporation may require.
 
ARTICLE II
SEAL
 
The seal of the corporation shall be a circular impression and shall bear the name of the corporation, the word “FLORIDA” and the word “SEAL”. The Board of Directors, by resolution, may change the form of the corporate seal from time to time.
 
ARTICLE III
MEETINGS OF SHAREHOLDERS
 
1.   Place . All meetings of the shareholders shall be held at such place within or without the State of Florida as may be designated by the Board of Directors at a meeting held not less than thirty (30) days prior to such meeting of shareholders. In the event the Board of Directors shall fail to designate a place for said meeting to be held, then the same shall be held at the principal office of the corporation.
 
2.   Annual Meeting . An annual meeting of shareholders for the election of directors and the transaction of such other business as may properly come before the meeting shall be held on the first Monday in May of each year or on such other date as shall be designated by the Board of Directors from time to time.
 
3.   Special Meetings . Special meetings of the shareholders shall be called by the Secretary upon request of the President or any two members of the Board of Directors.
 
 
-2-
 
 
4.   Notice . Notice of each meeting of shareholders, stating the place, day and hour of the meeting and, in case of a special meeting, the purpose or purposes for which the meeting is called, signed by or bearing the facsimile signature of the Secretary or Assistant Secretary, shall be delivered or given as provided in Article X of these By-Laws not less than ten (10) nor more than sixty (60) days prior to the date of said meeting.
 
5.   Quorum . The holders of a majority of the shares of stock issued and outstanding and entitled to vote at any meeting present in person or represented by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business, except as otherwise provided by law, by the Certificate of Incorporation or by these By-Laws; provided, however, that in the absence of a quorum, the holders of a majority of the shares present and voting at said meeting, either in person or by proxy, shall have the right successively to adjourn the meeting to a specified date not longer than ninety (90) days after such adjournment, and no notice of such adjournment need be given to shareholders not present at the meeting. Every decision which shall receive the favorable vote of a majority of the votes cast in connection therewith at any meeting of the shareholders at which a quorum is present shall be valid as a corporate act unless a larger vote is required by law, by the Certificate of Incorporation, or by these By-Laws.
 
ARTICLE IV
VOTING PROCEDURE
 
At each meeting of the shareholders, whether annual or special, the transfer books of the corporation shall be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder. The Board of Directors shall have the power to close the transfer books, or fix in advance a date not exceeding sixty (60) days preceding the date of any meeting of shareholders as a record date for the determination of the shareholders entitled to notice of and to vote at any such meeting, provided in such event notice of the date so set shall be published, if and as required by law. If the Board of Directors shall not close the transfer books or set a record date for the determination of the shareholders entitled to vote, no person shall be admitted to vote, directly or by proxy, except those in whose names the shares of the corporation shall stand at the date of the meeting.
 
ARTICLE V
VOTERS
 
1.   Eligible Voters . Any shareholder owning one or more shares of stock on record in the stock books of the corporation as provided in Article IV of these By-Laws, shall be eligible to vote at any meeting of shareholders; provided, however, that no person shall be admitted to vote on any shares belonging or hypothecated to the corporation. On each matter submitted to a vote, including election of directors, each such shareholder shall have as many votes as he has shares of stock in this corporation. Cumulative voting for directors shall not be permitted.
 
2.   Proxies . A shareholder may vote either in person or by proxy executed in writing by the shareholder or his duly authorized attorney in fact.
 
 
-3-
 
 
ARTICLE VI
BOARD OF DIRECTORS
 
1.   Management and Number . The property, business and affairs of the corporation shall be controlled and managed by a Board of Directors consisting of three (3) members, with one (1) position to remain vacant and with such directors to be elected annually by the shareholders. The number of directors may be increased or decreased from time to time by resolution of the Board of Directors, but no decrease shall have the effect of shortening the term of any incumbent director.
 
2.   Vacancies . Whenever any vacancy on the Board of Directors shall occur due to death, resignation, retirement, removal, increase in the number of directors or otherwise, a majority of directors in office, although less than a majority of the entire Board, may fill the vacancy or vacancies for the balance of the unexpired term or terms, at which time a successor or successors shall be duly elected by the shareholders and shall qualify.
 
3.   Quorum . A majority of the directors shall constitute a quorum for the transaction of business by the Board of Directors. Any act or decision of the majority of the directors present at a meeting at which a quorum is present shall be the act or decision of the Board of Directors.
 
4.   Place of Meetings . Meetings of directors shall be held at the principal office of the corporation or such other place or places, either within or without the State of Florida, as may be agreed upon by the Board of Directors.
 
5.   Regular and Special Meetings . Regular meetings of the Board of Directors shall be held as frequently and at such time and place as may be determined by the Board of Directors from time to time. Special meetings of the Board of Directors shall be called by the Secretary at any time on request of the President or two members of the Board of Directors.
 
6.   Notice . Regular or special meetings of the Board of Directors may be held upon two (2) days’ notice given as provided in Article X of these By-Laws.
 
7.   Interest in Transactions . No contract or other transaction between the corporation and any person, firm association, corporation, subsidiary or affiliated corporation, and no other act of the corporation, shall, in the absence of fraud, be invalidated or in any way affected by the fact that any of the directors of the corporation are, directly or indirectly, pecuniarily or otherwise interested (either as director, shareholder, officer, employee, member or otherwise) in such person, firm association, corporation, subsidiary or affiliated corporation. Any director of the corporation individually, or any firm or association of which any director may be a member or shareholder may be a party to, or may be pecuniarily or otherwise interested in, any contract or transaction of the corporation, provided that the fact that he individually or such firm or association is so interested shall be disclosed or known to the Board of Directors, or a majority of such members, thereof as shall be present at any meeting of the Board of Directors at which action upon any such contract, transaction or other act is taken; and if such fact shall be so disclosed or known, any director of this corporation so related or otherwise interested may be counted in determining the presence of a quorum at any meeting of the Board of Directors at which action upon any such contract, transaction or act shall be taken, and may vote thereat with respect to any such action to which he is so related or in which he is interested.
 
 
-4-
 
 
8.   Executive Committee . The Board of Directors may appoint from among its members an Executive Committee of not less than three (3) members, one of whom shall be either the Chairman of the Board or the President, and shall designate one of its members as Chairman. The Board may also designate one or more of its members as alternates to serve as a member or members of the Executive Committee in the absence of a regular member or members. The Board of Directors reserves to itself alone the power to declare dividends, to recommend to shareholders any action requiring their approval, to issue additional securities and to fill vacancies therein. Subject to the foregoing limitations the Executive Committee shall have and may exercise all other powers of the Board of Directors during the intervals between meetings.
 
9.   Other Committees . The Board of Directors may appoint from among its members one or more additional committees, each committee to consist of two (2) or more members. Any such committee, to the extent provided in said resolution or resolutions, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Company. The Board may also designate one or more of its members as alternates to serve as a member or members of a committee in the absence of a regular member or members.
 
10.   Advisory Committees . The Chairman of the Board may appoint from among the members of the Board of Directors or from management one or more advisory committees, each committee to consist of two (2) or more members. Any such advisory committee shall, to the extent requested by the Chairman of the Board, make recommendations to and advise the Board of Directors concerning matters presented to it.
 
11.   Chairman of the Board of Directors . The Chairman of the Board of Directors shall be chosen from the members of the Board of Directors and shall preside at all meetings of the Board of Directors. He may sign any instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to another person, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of Chairman of the Board of Directors and such other duties as may be prescribed by the Board of Directors from time to time.
 
12.   Vice Chairman of the Board of Directors . One or more Vice Chairmen (the number thereof to be determined by the Board of Directors) shall be chosen from the members of the Board of Directors and shall preside at meetings of the Board of Directors in the absence of the Chairman.
 
13.   Residency . The directors of the Company need not be residents of the State of Florida nor shareholders of the of the Corporation for which they are serving as a director in order to serve in such capacity.
 
 
-5-
 
 
ARTICLE VII
OFFICERS
 
1.   Executive Officers . The officers of the corporation shall be one or more Vice Chairmen of the Board of Directors (the number thereof to be determined by the Board of Directors), a President, one or more Vice Presidents (the number thereof to be determined by the Board of Directors), a Secretary and a Treasurer, each of whom shall be elected by the Board of Directors. Each Vice Chairman of the Board of Directors shall be chosen from the members of the Board of Directors. Such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. Any two or more offices may be held by the same person.
 
2.   Election and Term of Office . The officers of the corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as convenient. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided.
 
3.   Removal . Any officer or agent elected or appointed by the Board of Directors may be removed by the Board of Directors whenever in its judgment the best interest of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed.
 
4.   Vacancies . A vacancy in any office because of death, resignation, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term.
 
ARTICLE VIII
DUTIES OF OFFICERS
 
1.   Vice Chairman of the Board of Directors . The Vice Chairman of the Board of Directors, in addition to his or her duties under Article VI, Section 12, shall serve as an adviser to the officers on the affairs of the corporation and shall perform such other duties as from time to time may be assigned to him or her by the Board of Directors.
 
2.   President . The President shall preside at meetings of the shareholders. Subject to the Board of Directors, the President shall in general supervise and control all of the business and affairs of the corporation. In addition to any other powers and duties that may be assigned to him by the Board of Directors, he may sign, with the Secretary or any other proper officer of the corporation thereunto authorized by the Board of Directors, certificates for shares of the corporation, any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed, except in cases where the signing and execution thereof shall be expressly delegated by the Board of Directors or by these By-Laws to some other officer or agent of the corporation, or shall be required by law to be otherwise signed or executed; and in general shall perform all duties incident to the office of President.
 
 
-6-
 
 
3.   Vice President . The Company shall have at least one Vice President. In the absence of the President, the Vice President designated by the Board of Directors shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions of the President. A Vice President shall perform such other duties as from time to time may be assigned to him by the President or by the Board of Directors.
 
4.   Secretary . The Secretary shall attend all meetings of the shareholders and of the Board of Directors and act as clerk thereof, and shall record all votes and the minutes of all proceedings in a minute book to be kept of that purpose. He shall keep in safe custody the seal of the corporation, and when authorized by the Board of Directors or the President or a Vice President, he shall affix the seal to any instrument requiring the seal, and, when so ordered, add his signature as an attestation thereof. He shall give, or cause to be given, a notice as required of all meetings of the shareholders and of the Board of Directors. He shall keep or cause to be kept a stock certificate and transfer book and a list of all the shareholders and their respective addresses. He shall perform such other duties as may be prescribed from time to time by the Board of Directors.
 
5.   Treasurer . The Treasurer shall have custody of the corporate funds and securities and shall keep or cause to be kept full and accurate accounts of receipts and disbursements in books of the corporation to be maintained by him for such purpose; he shall deposit all monies and other valuable effects of the corporation in the name and to the credit of the corporation in depositories designated by the Board of Directors. He shall disburse the funds of the corporation as may be ordered by the Board of Directors.
 
6.   Delegation of Power . In case of absence of any officer of the corporation or for any other reason that the Board of Directors may deem sufficient, the board may delegate the powers or duties of such officer to any other officer or to any director for the time being, provided a majority of the entire Board concurs therein.
 
ARTICLE IX
CERTIFICATES OF STOCK AND TRANSFERS
 
1.   Issuance . Certificates of stock of the corporation shall be issued and signed by the President or a Vice President and the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer, and shall bear the corporate seal. Such seal may be facsimile, engraved or printed. Certificates shall be numbered consecutively and registered as they are issued. They shall indicate, upon their face, among other things, the owner’s name, the number and class of shares of stock represented by the certificate, the par value of shares of such class, the date of its issuance and the manner in which the shares may be transferred. When certificates are signed by a transfer agent or an assistant transfer agent or by a transfer clerk acting on behalf of the corporation and registrar, the signatures of any of the officers’ names may be facsimile signatures.
 
2.   Transfers . Transfers of stock shall be made on the books of the corporation only by the person named in the certificate or by his attorney lawfully constituted in writing, and upon surrender of such certificates properly endorsed.
 
 
-7-
 
 
3.   Transfer Books . Proper books shall be kept under the direction of the secretary, showing the ownership and transfer of all certificates of stock. The Board of Directors shall have the power to close said transfer books of the Corporation for a period not exceeding sixty (60) days preceding the date of payment of any dividend, or the date of the allotment of rights, or the date when any change or conversion of shares shall go into effect. In lieu of closing the stock transfer books as aforesaid, the Board of Directors may fix in advance a date not exceeding sixty (60) days preceding the date for the payment of any dividend or the date of the allotment or right, or the date when any change or conversion or exchange of shares shall go into effect, as a record date for the determination of the shareholders entitled to receive payment of any such dividend, or to any such allotment of rights, or to exercise the right in respect of any change, conversion or exchange of shares. In such case, such shareholders and only such shareholders as shall have been shareholders of record on the date of closing of the transfer books or on the record date so fixed shall be entitled to receive such allotment of rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any shares on the books of the Corporation after such date of closing of the transfer books or such record date so fixed as aforesaid.
 
4.   Holders of Record . The corporation shall be entitled to treat the holder of record of any shares of stock as the holder in fact thereof and accordingly shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice hereof, save as expressly provided by the Laws of Florida.
 
ARTICLE X
NOTICES
 
1.   Notice Deemed Given . Whenever under the provision of these By-Laws notice is required to be delivered to any director, officer or shareholder, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid, or dispatched by prepaid telegram, addressed to such individual at this address at it appears on the records of the corporation, or when delivered in person to the individual.
 
2.   Attendance as Waiver . Notice of any meeting required to be given under the provisions of these By-Laws or the laws of the State of Florida shall be deemed waived by the attendance at such meeting of the party or parties entitled to notice thereof, except where a party or parties attend a meeting for the express purpose of objecting to the transaction of any business because the meeting was not lawfully called or convened.
 
3.   Waiver of Notice . Any notice required to be given under the provisions of these By-Laws or the laws of the State of Florida may be waived by the persons entitled thereto signing a waiver of notice before or after the time of said meeting, and such waiver shall be deemed equivalent to the giving of such notice. Such waiver of notice may be executed in person by the party entitled thereto or by his agent duly authorized in writing to so do.
 
 
 
-8-
 
 
ARTICLE XI
ACTION BY CONSENT
 
1.   Any action required to be, or which might be, taken at a meeting of the shareholders after notice may be taken at a meeting of the shareholders held without notice of holders of four-fifths of the shares having the right and entitled to vote shall be present at such meeting and shall sign a written consent thereto on the record of the meeting .
 
2.   If all the directors severally or collectively consent in writing to any action to be taken by the directors, such consents shall have the same force and effect as a unanimous vote of the directors at a meeting duly held .
 
ARTICLE XII
INDEMNIFICATION OF OFFICERS, DIRECTORS, EMPLOYEES AND AGENTS
 
1.   Indemnification With Respect To Third Party Actions . The Corporation shall indemnify any person who was or is made a party (other than a party plaintiff suing on his own behalf) or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than one by or in the right of the Corporation, by reason of the fact that such person is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust, profit sharing plan, or other enterprise against expenses (including attorneys’ fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding, or any appeal thereof, if such person acted in good faith and in the reasonable belief that such action was in, or not opposed to, the best interests of the Corporation (or such other corporation, partnership, joint venture, trust, profit sharing plan or other enterprise which he may have been serving), and with respect to any criminal action or proceeding, if such person had no reasonable cause to believe that his conduct was unlawful. The termination of any such action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its equivalent shall not in itself create a presumption that such person did not act in good faith and in a manner that he reasonably believed to be in, or not opposed to, the best interests of the Corporation (or such other corporation, partnership, joint venture, trust, profit sharing plan or other enterprise which he may have been serving), or with respect to any criminal action or proceeding, that such person had reasonable cause to believe that his conduct was unlawful. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers.
 
 
 
-9-
 
 
2.   Indemnification With Respect To Actions By Or In The Right Of The Corporation . The Corporation shall indemnify any person who is or was made a party (other than a party plaintiff suing in the right of the Corporation) or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that such person is or was a director or officer of the Corporation, or is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust, profit sharing plan or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by him in connection with the defense or settlement of such action, suit or proceeding, or in connection with an appeal thereof, if such person acted in good faith and in a manner he reasonably believed to be in, or not opposed to, the best interests of the Corporation (or such other corporation, partnership, joint venture, trust, profit sharing plan or other enterprise which he may have been serving); provided that such person shall not be entitled to indemnification in relation to matters as to which such person has been finally adjudged to have been guilty of gross negligence or willful misconduct. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers.
 
3.   Determination Of Right To Indemnification . Any indemnification under this Article XII (unless pursuant to a determination by a court) shall be made by the Corporation unless a determination is made that indemnification of the director or officer (or employee or agent, if applicable) is not proper in the circumstances because he has not met the applicable standard of conduct set forth in Section 1 or Section 2. Such determination shall be made (i) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (ii) if such a quorum is not obtainable or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (iii) by the shareholders by a majority vote of a quorum consisting of shareholders who were not parties to such action, suit or proceeding.
 
4.   Payment Of Expenses In Advance Of Disposition Of Action . Expenses incurred by defending a civil or criminal action, suit or proceeding may be paid by Corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer (or employee or agent, if applicable) to repay such amount unless it shall ultimately be determined that he is entitled to be indemnified by the Corporation as provided in this Article XII.
 
5.   Indemnification Provided In This Article “Nonexclusive.” The indemnification provided by this Article XII shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any other by-law, agreement, vote of shareholders or disinterested directors, or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office, except no indemnification shall be made against gross negligence or willful misconduct. The indemnification provided by this Article XII shall continue as to any person who has ceased to be a director or officer (or employee or agent, if applicable) of the Corporation and shall inure to the benefit of the heirs, legal representatives, executors, administrators and assigns of such person.
 
 
-10-
 
 
6.   Insurance . The Corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, profit sharing plan or other enterprise against any liability asserted against him and incurred by him in any such capacity or arising out of his status as such, whether or not the Corporation would have the power to indemnify him against such liability under the provisions of this Article XII.
 
7.   Statement To Shareholders . If any expenses or other amounts are paid by way of indemnification otherwise than by court order or action by the shareholders or by an insurance carrier pursuant to insurance maintained by the Corporation, the Corporation shall, not later than the time of delivery to shareholders of written notice of the next annual meeting of shareholders, unless such meeting is held within 3 months from the date of such payment, and, in any event, within 15 months from the date of such payment, deliver either personally or by mail to each shareholder of record at the time entitled to vote for the election of directors a statement specifying the persons paid, the amounts paid, and the nature and status at the time of such payment of the litigation or threatened litigation.
 
8.   Savings Clause . In the event that any provision of this Article XII shall be held invalid by any court of competent jurisdiction, such holding shall not invalidate any other provision of this Article XII and any other provisions of this Article XII shall be construed as if such invalid provision had not been contained in this Article XII. In any event, the Corporation shall indemnify any person who is or was a director or officer of the Corporation, or who is or was serving at the request of the Corporation as a director or officer of another corporation, partnership, joint venture, trust, profit sharing plan or other enterprise, to the fullest extent permitted under Florida law, as from time to time in effect. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers.
 
9.   Effectiveness . The indemnification provided by this Article XII shall apply only to those acts or omissions of any person indemnified hereunder that occur on or after the date this Article XII becomes effective. The indemnification provided by the predecessor to this Article XII shall apply to those acts or omissions of any person indemnified hereunder that occur before the date this Article XII becomes effective, regardless of when a claim may be brought or made against such person. The indemnification provided by this Article XII shall survive any amendment or repeal of this Article XII with respect to expenses incurred in connection with claims (regardless of when such claims are brought or made) arising out of acts or omissions occurring prior to such amendment or repeal.
 

-11-
 
 
ARTICLE XIII
AMENDMENTS
 
The By-Laws, or any of them, or any additional or supplementary By-Laws, may be altered, amended or repealed, and new By-Laws may be adopted at any annual meeting of the shareholders without notice, or at any special meeting of the notice of which shall set forth the terms of the proposed By-Law or action to be taken on any By-Laws, by a vote of the majority of the shares represented in person or by proxy and entitled to vote at such annual or special meeting, as the case may be. The Board of Directors shall also have the power to adopt new By-Laws, and to amend, alter and repeal these and any additional and supplementary By-Laws at any regular or special meeting of the Board of Directors, in any manner not inconsistent with any By-Laws that shall have been adopted by the shareholders. Notice of any such action to be taken on any By-Laws that shall have been adopted by the shareholders. Notice of any such action to be taken on any By-Laws need not be included in the call of said meeting.
 
 
 
 
 
 
 
 
 
 
 
-12-
 
Exhibit 31(i).1
RULE 13a – 14(a)
CERTIFICATION
 
I, Laurence A. Schiffer, certify that;
 
1.
I have reviewed this quarterly report on Form 10-Q of PGI Incorporated;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 
/s/ Laurence A. Schiffer                 May 11, 2018
Laurence A. Schiffer
Principal Executive Officer
 
 
 
Exhibit 31(i).2
RULE 13a – 14(a)
CERTIFICATION
 
I, Laurence A. Schiffer, certify that;
 
1.
I have reviewed this quarterly report on Form 10-K of PGI Incorporated;
 
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
 
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
 
4.
The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
 
a)
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
 
5.
The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
 
a)
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
 
/s/ Laurence A. Schiffer        May 11, 2018
Laurence A. Schiffer
Principal Financial Officer
 
 
 
 
Exhibit 32.1
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350 *
 
 
In connection with the Quarterly Report of PGI Incorporated (the “Company”) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Laurence A. Schiffer, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
 
 
(1)
The Report fully complies with the requirements of section 13(a) or 15(d) , as applicable, of the Securities Exchange Act of 1934; and
 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
 
 
/s/ Laurence A. Schiffer
    Laurence A. Schiffer
    Chief Executive Officer (Principal Executive Officer)  May 11, 2018
 
 
*A signed original of this written statement has been provided to the Company and will be retained by the Company and will be furnished to the Securities and Exchange Commission or its staff upon request.
 
 
Exhibit 32.2
 
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350*
 
 
In connection with the Quarterly Report of PGI Incorporated (the “Company”) on Form 10-Q for the period ended March 31, 2018 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Laurence A. Schiffer, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:
 
(1)
The Report fully complies with the requirements of section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934; and
 
(2)
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
 
/s/ Laurence A. Schiffer
    Laurence A. Schiffer
    Chief Financial Officer (Principal Financial Officer)  May 11, 2018
 
 
*A signed original of this written statement has been provided to the Company and will be retained by the Company and will be furnished to the Securities and Exchange Commission or its staff upon request.