-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KJ249+p+zxcKJuju/TKJG9fjNAJo/sarjoBXqzrE9fATWc93cK0M4QaI39CxqotJ kPnwbJqKHYmDPLmWh17iZw== 0001000096-05-000447.txt : 20050809 0001000096-05-000447.hdr.sgml : 20050809 20050809164348 ACCESSION NUMBER: 0001000096-05-000447 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20040331 FILED AS OF DATE: 20050809 DATE AS OF CHANGE: 20050809 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLANGRAPHICS INC CENTRAL INDEX KEY: 0000783284 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 840868815 STATE OF INCORPORATION: CO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14273 FILM NUMBER: 051010521 BUSINESS ADDRESS: STREET 1: 112 EAST MAIN STREET STREET 2: FLOOR 1 CITY: FRANKFORT STATE: KY ZIP: 40601 BUSINESS PHONE: 502 223 1501 MAIL ADDRESS: STREET 1: 19039 E PLAZA DR STREET 2: STE 245 CITY: PARKER STATE: CO ZIP: 80134 FORMER COMPANY: FORMER CONFORMED NAME: INTEGRATED SPATIAL INFORMATION SOLUTIONS INC /CO/ DATE OF NAME CHANGE: 19981015 FORMER COMPANY: FORMER CONFORMED NAME: INTEGRATED SPATIAL INFORMATION SYSTEMS INC DATE OF NAME CHANGE: 19980710 FORMER COMPANY: FORMER CONFORMED NAME: DCX INC DATE OF NAME CHANGE: 19920703 10QSB 1 plang304.txt FORM 10-QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2004. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . -------------- --------------- Commission file number 0-14273 PLANGRAPHICS, INC. (Exact name of small business issuer as specified in its charter) COLORADO 84-0868815 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 112 East Main Street Frankfort, KY 40601 ------------------- (Address of principal executive offices) (Zip Code) Administrative Office at 19039 East Plaza Drive, Suite 245 Parker, CO 80134 (720) 851-0716 -------------- (Small business issuer's telephone number, including area code) ----------------------------------------- (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 of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No 97,214,418 shares of common stock were outstanding as of July 31, 2005. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] Number of pages in this report is 20 CAUTIONARY NOTES Forward-Looking Statements. This Quarterly Report on Form 10-QSB and the information incorporated by reference may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and the outcome of any contingencies are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as "may," "believe," "plan," "will," "anticipate," "estimate," "expect," "intend," and other phrases of similar meaning. Known and unknown risks, uncertainties and other factors could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and was derived using numerous assumptions. Forward-looking statements include, but are not limited to, statements in this Form 10-QSB regarding: o our ability to raise funds through equity and debt financing; o our ability to achieve profitable operations; o our ability to compete effectively; o the strength of our technical expertise and customer service; o the potential fluctuation of the market price of our stock; o the evolving market for global information systems; o the potential gross profit margin in information technology; o the impact of recent accounting pronouncements. Risks. Although we believe that the expectations that we express in this report are reasonable, we cannot promise that our expectations will turn out to be correct or will be accomplished in the time frame we contemplated. Our actual results could be materially different from our expectations, including the following: o we continue to experience very constrained cashflows and may not overcome the underlying reasons for the going concern caution included in Note B to our financial statements for the year ended September 30, 2003; o we may lose customers or fail to grow our customer base; o we may not be able to sustain our current growth or to successfully integrate new customers or assets obtained through future strategic partnerships, joint ventures or acquisitions; o we may fail to compete successfully with existing and new competitors; o we may not adequately anticipate and respond to technological developments impacting information services and technology; This list is intended to identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included elsewhere in this report. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements included in our Annual Report for the period ended September 30, 2003 and filed on Form 10-KSB under the caption "Item 1. Business - Risk Factors" beginning on page 9, our other Securities and Exchange Commission filings, and our press releases. The use of pronouns "we," "us," and "our" refer to the company and its subsidiary collectively. We may refer to the investor or investors in our company as "you" or "your" in this report. 2 Table of Contents Cautionary Note About Forward-Looking Statements 2 Part I Financial Information 4 Item 1. Financial Statements (Unaudited) 4 Consolidated Balance Sheet 4 Consolidated Statements of Operations 5 Consolidated Statements of Cash Flow 6 Notes to Consolidated Financial Statements 7 Item 2. Management Discussion and Analysis 10 Item 3. Controls and Procedures 14 Part II Other Information 14 Item 6. Exhibits Index 14 Signature Page 16 Exhibits 17 3
Part I Financial Information Item 1. Financial Statements PLANGRAPHICS, INC. Consolidated Balance Sheet March 31, 2004 ASSETS (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 1,682 Accounts receivable, net 3,800,483 Prepaid expenses and other 86,925 ------------ Total current assets 3,889,090 ------------ PROPERTY AND EQUIPMENT Land and building under capital lease - related party 1,866,668 Equipment and furniture 891,967 ------------ 2,758,635 Less accumulated depreciation and amortization 1,664,650 ------------ 1,093,985 ------------ OTHER ASSETS Goodwill 1,907,107 Software, for future project use, net of accumulated amortization of $74,802 351,978 Other 82,611 ------------ 2,341,696 ------------ $ 7,324,771 ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable - current maturities $ 715,296 Notes payable - related parties 20,000 Obligations under capital lease - related party, current 141,344 Accounts payable 1,916,717 Accrued payroll costs and vacations 499,278 Accrued expenses 599,675 Deferred revenue and prebillings 539,386 ------------ Total current liabilities 4,431,696 ------------ LONG-TERM LIABILITIES Long-term obligations under capital leases - related party, less current maturities 1,150,188 Notes payable, less current maturities 200,000 ------------ Total long-term liabilities 1,350,188 ------------ COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY Convertible preferred stock, $.001 par value, 20,000,000 shares authorized, no shares issued or outstanding -- Common stock, no par value, 2,000,000,000 shares authorized, 97,214,418 shares issued and outstanding 20,688,118 Notes receivable for equity transactions Accumulated deficit (19,145,231) ------------ 1,542,887 ------------ $ 7,324,771 ============ See accompanying notes to unaudited consolidated financial statements 4 PLANGRAPHICS, INC. Consolidated Statements of Operations (Unaudited) For the three and six month periods ended March 31, Six months ended Three months ended ---------------------------- ---------------------------- 2004 2003 2004 2003 Revenues $ 4,240,971 $ 3,490,232 $ 2,110,120 $ 1,840,593 Cost of sales: Direct contract costs 2,870,356 2,333,458 1,342,564 1,349,634 Salaries and employee benefits 931,332 1,001,390 458,444 520,883 General and administrative expenses 426,296 459,069 195,271 199,377 Marketing expenses 88,267 180,887 49,669 84,301 Other operating expenses 149,824 121,416 71,721 60,850 ------------ ------------ ------------ ------------ Total costs and expenses 4,466,075 4,096,220 2,117,669 2,215,045 ------------ ------------ ------------ ------------ Operating loss (225,104) (605,988) (7,549) (374,452) ------------ ------------ ------------ ------------ Other income (expense): Other income 43,410 26,433 6,504 23,244 Interest expense (131,964) (130,978) (65,965) (68,068) ------------ ------------ ------------ ------------ (88,554) (104,545) (59,461) (44,824) ------------ ------------ ------------ ------------ NET LOSS $ (313,658) $ (710,533) $ (67,010) $ (419,276) ============ ============ ============ ============ Basic earnings (loss) per common share $ (0.00) $ (0.01) $ (0.00) $ (0.00) ------------ ------------ ------------ ------------ Diluted earnings (loss) per common share $ (0.00) $ (0.01) $ (0.00) $ (0.00) ------------ ------------ ------------ ------------ Weighted average number of shares of common stock outstanding for: Basic earnings (loss) per share 97,214,418 97,214,418 97,214,418 97,214,418 ============ ============ ============ ============ Diluted earnings (loss) per share 97,214,418 97,214,418 97,214,418 97,214,418 ============ ============ ============ ============ See accompanying notes to unaudited consolidated financial statements 5 PLANGRAPHICS, INC. Consolidated Statements of Cash Flows (Unaudited) Six Months ended March 31, 2004 2003 Cash flows provided by operating activities: Net loss $ (313,658) $ (710,533) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 149,824 113,723 Cancellation of debt -- (23,665) Changes in operating assets and liabilities, net of Xmarc Ltd acquisition Accounts receivable 143,497 917,125 Prepaid expenses and other (37,353) 13,458 Other assets 13,179 (28,022) Accounts payable 644,170 (112,866) Accrued expenses (412,576) 80,642 Deferred revenue and prebillings (77,513) 45,332 ----------- ----------- Net cash provided by operating activities 109,570 295,194 ----------- ----------- Cash flows used in investing activities: Purchases of equipment (2,895) (39,911) Addition to software held for future use (28,084) -- ----------- ----------- Net cash used in investing activities (30,979) (39,911) ----------- ----------- Cash flows used in financing activities: Proceeds from debt 2,048,634 1,057,000 Payments on debt (2,133,611) (1,259,367) Payments on note payable - related parties (138,400) -- Payments on obligations under capital lease (64,498) (56,654) Repayment of note receivable for stock purchase 182,750 -- ----------- ----------- Net cash used in financing activities (105,125) (259,021) ----------- ----------- Net decrease in cash (26,534) (3,738) Cash and cash equivalents at beginning of year 28,216 60,806 ----------- ----------- Cash and cash equivalents at end of period $ 1,682 $ 57,068 =========== =========== See accompanying notes to unaudited consolidated financial statements 6
PLANGRAPHICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Consolidated Financial Statements The summary of our significant accounting policies are incorporated by reference to our annual report of September 30, 2003, on Form 10-KSB filed with the Securities and Exchange Commission. Readers are herewith notified to read the "Going Concern" caution in Note B to our financial statements for the year ended September 30, 2003. The financial statements in this report have been presented on a going concern basis that contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. While we have secured a new and larger financing arrangement for accounts receivable, our viability as a going concern is dependent upon our ability to achieve profitable operations through increased sales and higher margins through software licensing. The accompanying unaudited consolidated financial statements for PlanGraphics, Inc. and its operating subsidiary in this quarterly report reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results of operations, financial position and cash flows. We believe that the disclosures are adequate to make the information presented not misleading. The results of this interim period are not necessarily indicative of the results for the full fiscal year ending September 30, 2004. Certain prior year financial statement amounts have been reclassified to conform to the current year presentation. (2) Accounts Receivable The components of contract accounts receivable are as follows: Components of Accounts Receivable March 31, 2004 -------------- Unaudited Contract receivables: Billed $2,864,388 Unbilled 936,095 ---------- 3,800,483 Less allowance for doubtful accounts -- ---------- Accounts receivable, net $3,800,483 We have historically received greater than 10% of annual revenues from one or more customers. Projects funded through the City of New York's Department of Information Technology and Telecommunications (NYDOITT) contract vehicle accounted for 76% of revenue for the three-month period ended March 31, 2004, compared to March 31, 2003 when they accounted for 53%. In addition, at March 31, 2004, NYDOITT accounted for 35% of billed accounts receivable compared to 50% at March 31, 2003. NYDOITT is the largest of our current customers and its revenues represent services both as a client and as a contract vehicle utilized by as many as 20 different departments within the New York City government through individual order assignments. The diversity of order assignments and variety of departments as clients diminishes the concentration of revenue and receivables in a manner not obvious from the financial description above. Deferred revenue amounts are $539,386 at March 31, 2004 and represent amounts billed in excess of amounts earned. 7 (3) Provision for Income Taxes At the beginning of this fiscal year we had net operating loss carryforwards of $12.8 million with expirations through 2023. At March 31, 2004, the amount of the net operating loss carryforward balance is estimated at $13.1 million. Since we are unable to determine that deferred tax assets exceeding tax liabilities are more likely than not to be realized, we have recorded a valuation allowance equal to the net deferred tax assets at September 30, 2003 and at March 31, 2004. As a result, no provision or benefit for income tax has been recorded for the three and six month periods ended March 31, 2004. (4) Lease Obligations We lease various equipment as well as facilities under capital and operating leases that expire through the year 2007 as noted in Note F to the Consolidated Financial Statements in Form 10-KSB for the fiscal year ended September 30, 2003. (5) Related Party Transactions In October, 2003 we obtained a temporary addition to our asset based line of credit ("LOC") with BB&T in the amount of $150,000. The transaction is evidenced by a promissory note dated October 28, 2003, bearing interest at 2% per annum with a maturity date of January 28, 2004. The additional funding was made available by a compensating balance deposit provided by a related party, Human Vision LLC, which is controlled by a director of PGI. On February 19, 2003, we paid the temporary increase to our LOC in full and, in turn, BB&T released the compensating balance funds to Human Vision LLC. (6) Net Income and Loss Per Common Share. Basic earnings (loss) per share includes no dilution and is computed by dividing income or loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of an entity, when appropriate. The total number of shares of common stock issuable upon exercise of warrants and options outstanding and exercisable at March 31, 2004 and 2003, were 13,328,965 and 12,231,751, respectively. The following is a reconciliation of the number of shares used in the Basic Earnings Per Share ("EPS") and Diluted EPS computations: Periods ending March 31, Six months Three months ----------------------- ----------------------- 2004 2003 2004 2003 Basic EPS share quantity 97,214,418 97,214,418 97,214,418 97,214,418 Effect of dilutive options and warrants* -- -- -- -- ---------- ---------- ---------- ---------- Dilutted EPS share quantity 97,214,418 97,214,418 97,214,418 97,214,418 *As we incurred a net loss in the three and six month periods ended March 31, 2004 and 2003 none of our outstanding options or warrants were included in the computation of diluted earnings per share for that period as their effect would be anti-dilutive. (7) Stock Based Compensation Financial Accounting Standard (FAS) No. 123, "Accounting for Stock-Based Compensation" and SFAS No. 148 "Accounting for Stock-Based Compensation - Transition and Disclosure" require the Company to provide pro forma information regarding net income and net income per share as if compensation costs for its stock option plans and other stock awards had been determined in accordance with the fair value based method prescribed in SFAS No. 123. Accordingly, compensation cost is not reflected in net income for options granted to officers 8 and directors from stock option plans for the periods presented, as the options have an exercise price greater than or equal to the market value of the underlying common stock on the date of grant. The fair value of options was estimated at the date of grant using a Black-Scholes option valuation model with the following weighted-average assumptions included in the three and six month periods ended March 31, 2004 and 2003, respectively: risk-free interest rates of 2.75% and 1.75%; dividend yields of 0%; volatility factors of the expected market price of our Common Stock of 121% and 134%; and expected life of the options varying from three to five years. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. Option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because PGI employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion the existing models do not provide a reliable single measure of the fair value of employee stock options. Had the expense for PGI's stock-based compensation been determined using the fair value based method defined in FAS 123, "Accounting for Stock-Based Compensation," its net income (loss) and net income (loss) per share would have been reported at the pro forma amounts indicated below:
Six Months Ended Three Months Ended 2004 2003 2004 2003 ---------- ---------- --------- ----------- Net income (loss): As reported $ (313,658) $ (710,533) $ (67,010) $ (419,276) Incremental Compensation Expense 34,382 34,559 17,191 24,592 ---------- ---------- --------- ----------- Pro forma $ (348,040) $ (745,092) $ (84,201) $ (443,868) ========== ========== ========= =========== Basic income (loss) per share: As reported $ (0.00) $ (0.01) $ (0.00) $ (0.00) ========== ========== ========= =========== Pro forma $ (0.00) $ (0.01) $ (0.00) $ (0.00) ========== ========== ========= =========== Diluted income (loss) per share As reported $ (0.00) $ (0.01) $ (0.00) $ (0.00) ========== ========== ========= =========== Pro forma $ (0.00) $ (0.01) $ (0.00) $ (0.00) ========== ========== ========= ===========
(8) Supplemental Cash Flow Information During the six months ended March 31, 2004, PlanGraphics paid $111,758 of interest. No payments of taxes were made. Schedule of Non-Cash Investing Activities Effective March 31, 2004, the Company acquired 100% of the outstanding stock of Xmarc Limited, ("XL") for a total purchase price of approximately $64,647 in a non-cash transaction (See note 10, below). The acquisition has been accounted for using the purchase method in accordance with SFAS No. 141, "Business Combinations." Accordingly, the total purchase price has been allocated to the assets acquired and liabilities assumed based on their estimated fair values at acquisition as follows: Accounts receivable $231,273 -- Goodwill 46,608 -- Accounts payable -- $151,574 Deferred income -- 61,660 Purchase price -- 64,647 -------- -------- $277,881 $277,881 9 (9) Recently Issued Accounting Pronouncements Management has reviewed accounting pronouncements issued during the six months ended March 31, 2004, and determined that none were applicable to our present operations. (10) Subsequent Events Xmarc Ltd Acquisition. During April 2004 we entered into an agreement to acquire Xmarc Ltd, a distributor of Xmarc products, in a transaction with an effective date of March 31, 2004. During January 2004, together with HPI, Ltd and Glendower Capital, we chose to reconsider the structure of the vehicle to be used in Europe for the sale of Xmarc products and the support of new and existing clients. In the interim, PlanGraphics continued to provide this support through a contract with Xmarc Ltd, a pre-existing distributor for XMarc in Europe. During the first quarter of calendar year 2004 the Company determined, in conjunction with the termination of the Xmarc Services Limited agreement, that it was more efficient and economical to simply acquire Xmarc Ltd, the already existing distributor for Xmarc in Europe. Accordingly, on April 30, 2004, we completed a transaction with an effective date of March 31, 2004, in which we acquired Xmarc Ltd in a non-cash transaction for $64,647. Payment was made by forgiveness of accounts receivable due to us from Xmarc Services Limited, owned by the sellers of XL. The results of XL's operations have been included in the consolidated financial statements since that date. Headquartered in Great Britain, XL has been a distributor of Xmarc products throughout Europe. The Company believes the acquisition has enhanced its strategic development and prospects for growth. New Credit Facility. Our existing line of credit expired on October 3, 2004, and we entered into a forbearance agreement with our lender, Branch Banking & Trust, Co. to allow us time to locate a replacement credit facility which was extended to January 10, 2005. On January 7, 2005 we entered into a 12-month financing arrangement with K Capital Partners, Inc. ("KCap") under which KCap will purchase up to $1.5 million of accounts receivable at varying levels of discount depending on the age of the receivables at the time of collection. This agreement was subsequently modified to provide that Rockland Credit Financing LLC, a minority participant in the KCap financing agreement, would become the lead financial institution with KCap becoming the subordinate. Letter of Intent. On October 18, 2004 we entered into a non-binding letter of intent with IceWEB, Inc. ("ICEW"), a provider of Web content management systems and tools located in Herndon, Virginia, under which we would merge with ICEW. The letter of intent has been modified from time to time. PGRA shareholders are to receive cash and ICEW common stock in exchange for PGRA common stock. ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Condition The following discussion of liquidity and capital resources addresses our requirements and sources as of March 31, 2004 and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes for the period ended September 30, 2003. Those prior year financial statements included a going concern statement and readers should take that into consideration. The Company presently continues to encounter very constrained cash flows and is carefully managing its resources while dealing with very limited cash availability. Cash Flow We continue to experience very constrained cash flows. As of March 31, 2004 we had a net working capital deficit of ($542,606) versus a net working capital deficit of ($424,587) at September 30, 2003 and a working capital deficit of ($301,505) at March 31, 2003. The further decrease in working capital deficit since March 31, 2003 resulted primarily from growth in current liabilities exceeding that in current assets. In the six months ended March 31, 2004, operations provided net cash of $109,570, as compared to $295,194 provided by operations in the period ended March 31, 2003. This decrease in cash provided was a result of the payments of accrued expenses coupled with the operating loss which partially offset the growth in accounts payable. 10 In the six month period ended March 31, 2004, net cash used in investing activities was $30,979 as compared to $39,911 of net cash used in investing activities in the period ended March 31, 2003. Increases to software held for future use accounted for the change. Financing activities in the period ended March 31, 2004 used $105,125 as compared to net cash of $259,021 used by financing activities in the period ended March 31, 2003. Payments received for notes receivable related to the purchase of stock were the primary reason for the decrease in cash used. Historically, our accounts receivable have been more than adequate to cover our line of credit and management believes that this will continue to be the case. Accounts receivable balances at March 31, 2004 and 2003, include both billed receivables and work-in-process. The payment terms on accounts receivable are generally net 30 days and collections generally average 45 to 90 days after invoicing. Although we experienced delayed collections, the typical collection period is consistent with industry experience with clients in the public sector. While this sometimes results in elevation and aging of the billed accounts receivable balance, our history reflects consistent collectibility of the receivable balances. Work-in-process represents work that has been performed but has not yet been billed. This work will be billed in accordance with milestones and other contractual provisions. The amount of unbilled revenues will vary in any given period based upon contract activity. As of March 31, 2004 our accounts receivable were $3,800,483 inclusive of work-in-process. During the current quarter billed receivables in arrears greater than 60 days were reduced from $1,729,851 at September 30, 2003 to $1,019,136 and no client accounted for more than $423,900. As of March 31, 2004, the number of days sales outstanding (DSO) were at approximately 161 days, as compared to 195 days a year prior and 174 days at September 30, 2003. The decreases from prior periods are related to improvement in payment procedures by one of our major customers. Management also believes that its net receivables are ultimately collectible or recoverable, net of certain reserves, and that aggregate allowances for doubtful accounts are adequate. The elevated levels of aged accounts receivable placed severe cash flow constraints on the company requiring it to very closely manage its expenses and payables. In addition, we raised temporary financing through a bridge loan. On October 28, 2003, we obtained a 90-day $150,000 addition to our asset-based line of credit with Branch Banking & Trust Co. ("BB&T"). The additional funding was made available by a compensating balance deposit by a related party, Human Vision LLC, which is controlled by one of our directors. On February 19, 2004 we paid the temporary addition to the LOC in full and, in turn, BB&T released the compensating balance funds to Human Vision LLC. Capital Resources On January 7, 2005 we entered into a 12-month financing arrangement with K Capital Partners, Inc. ("KCap") and subsequently Rockland Credit Financing LLC under which Rockland will purchase up to $1.5 million of accounts receivable at varying levels of discount depending on the age of the receivables at the time of collection. This new financing agreement replaces the previous asset based line of credit of February 15, 2002 with BB&T for $750,000 that was secured by the accounts receivable of PGI-MD. The BB&T line of credit expired on October 3, 2004, and we had entered into forbearance agreements with BB&T through January 10, 2005 allowing us time to locate the replacement credit facility. As of March 31, 2004, our cash and cash equivalents had decreased from September 30, 2003 to $1,682. We received a significant payment of $1,060,000 from a major customer during the prior quarter and paid down significant amounts of liabilities. During the current quarter we received an additional payment amounting to $727,000 from the same major customer which was also immediately applied to existing liabilities. Operations Outlook We continue to believe that information technology, which includes e-solutions, spatial data management and geographic information systems or "GIS," is a global market that is rapidly evolving and becoming the basis for a myriad of new applications and services to solve customer problems and create additional 11 markets. Despite the economic stress of the past years on our primary customer base, the public sector, we see continuing and increased expenditures in the service areas where we are most significantly involved. These include emergency response, non-emergency client/constituent management systems and asset management including utility infrastructure and real property. Our move into the public safety and emergency response was well timed and we believe that market will produce material additional work flow for the company in response to Homeland Security needs. As of March 31, 2004, we had total work backlog and assignments amounting to approximately $16.5 million, decreased from the $19.0 million reported for September 30, 2003 and from $18.6 million as of March 31, 2003. Approximately $12.4 of the backlog at March 31, 2004 was funded versus $8.7 million at September 30, 2003 and $5.9 million at March 31, 2003. Of the $16.5 million, we expect to complete approximately $6.5 million within 12 months. More recently our backlog at December 31, 2004 amounted to $15.7 million of which approximately $14.4 million is funded. Revenue from the December 31, 2004 backlog and assignments will be recognized through the fiscal year ending September 30, 2006. We report backlog based on executed contracts. Assignments include contract awards where documentation is pending or task orders based on existing indefinite quantity contract vehicles. A typical contract, standard for the industry, includes terms that permit termination for convenience by either party with 30 days prior notice. As most of our orders are from existing or previous customers with whom we have a good relationship, we do not anticipate cancellation of such contracts or order assignments. We believe our purchase of the XMARC intellectual property and spatial integration software components for use in the public sector and utility markets provides us with increased access to federal, state and local government clients in addition to commercial enterprises as well as revenue from maintenance of existing XMARC systems already in the field. By combining the XMARC technologies with those of other suppliers of advanced software technologies, we have developed an Internet based product and service offering for use in emergency response and recovery as well as a portal to other enterprise information systems. We believe our acquisition of Xmarc Limited, a European distributor of Xmarc technologies, located in the United Kingdom, provides us with new customers and opportunities throughout Europe. Currently, we plan to grow internally, through strategic alliances and through mergers or acquisitions that enhance shareholder value. We have made substantial progress in positioning ourselves as a provider of Internet-accessible data repositories and warehouses that leverage spatial data. Several of our current assignments and a material portion of our contract backlog and assignments are associated with these initiatives. Further, our past marketing efforts in China continue to yield results measured by increased sales to current clients and anticipated projects funded by the World Bank and a number of alliances and business partner arrangements that have been consummated. In addition, PlanGraphics has taken specific steps to position ourselves for strategic alliances, joint venture opportunities and additional mergers or acquisitions including reorganizing our corporate governance and management structure and the retention of third party advisors and investment bankers. Results of Operations Result of Operations for the three months Ended March 31, 2004 Revenues Our revenues increased $269,527 or 15% from $1,840,593 for the quarter ended March 31, 2003 to $2,110,120 for the quarter ended March 31, 2004. This increase was related to improved economic factors affecting our customers and funding increases available to them resulting in new work for us. Costs and Expenses Total costs and expenses for the quarter ended March 31, 2004 amounted to $2,117,669, a decrease of $97,376 over the $2,215,045 for the quarter ended March 31, 2003 driven primarily by increased direct contract costs. This 4% decrease compares favorably to the 15% increase in revenue for the period. The costs associated with the public parent company, PlanGraphics of Colorado, were $94,430 for the period an increase of $13,483 from the prior year period of $80,947; the increase is associated with the added costs of regulatory compliance. Direct contract costs decreased slightly by $7,070, versus the increase in revenue, in response to new work. Salaries and benefits decreased by approximately $62,439, or 12% as a result of attrition and the shifting of work to subcontractors. General and administrative expenses decreased slightly by $4,106, or 2%; marketing expense decreased $34,632, or 41% as conference and professional fee expenses decreased; and, finally, other operating costs increased by $10,871 or 18% due to amortization of legal costs to acquire XMARC rights and increased equipment depreciation over the prior year. 12 Net loss On a consolidated basis, our operating loss for the quarter ended March 31, 2004 was $7,549, an improvement over prior year operating loss of $374,452. This improvement is attributable to increased revenues during the current quarter. The operating subsidiary, PlanGraphics of Maryland, contributed $6,686 of the net operating loss for the quarter ended March 31, 2004, an improvement over prior year operating loss of $239,505 for the operating subsidiary. Interest expense amounted to $65,965 in the current quarter and compares with $68,068 during the same period of the prior year. Other income decreased from the prior year total by $16,740. On a consolidated basis, we incurred a net loss of $67,010 for the quarter ended March 31, 2004 as compared to the net loss of $419,276 for the prior year period. The impacts noted above account for the reduction in the net loss. For the same period, the operating subsidiary, PlanGraphics of Maryland, incurred a net loss of $85,231, an improvement over the prior year period net loss by the operating subsidiary of $338,518. Result of Operations for the six months Ended March 31, 2004 Revenues Our revenues increased $750,739 or 22% from $3,490,232 for the six month period ended March 31, 2003 to $4,240,971 for the period ended March 31, 2004. This increase was related to improved economic factors affecting our customers and funding increases available to them which translated into new work for us. Costs and Expenses Total costs and expenses for the period ended March 31, 2004 amounted to $4,466,075, an increase of $369,855 compared to $4,096,220 for the period ended March 31, 2003, and was primarily caused by increases in direct contract costs and increased depreciation. This 9% increase compares favorably to the 22% increase in revenue for the period. The costs associated with the public company, PlanGraphics of Colorado, were $167,205 for the period a /decrease from the prior year period of $184,145; the decrease is associated with the reduction in accounting and audit fees Direct contract costs increased $536,898 or 23% leading the increase in revenue as we shifted some work to subcontractors and began new work. Salaries and benefits decreased by approximately $70,058, or 7%, due to attrition during the period. General and administrative expenses decreased by $32,773, or 7%, caused mostly by decreases in rent; while marketing expense decreased $92,620, or 51%, from decreases in conference costs and professional fees; and, finally, other operating costs increased by $28,408 or 23% due to amortization of costs to acquire XMARC rights and increased equipment depreciation over the prior year. Net loss On a consolidated basis, our operating loss for the six month period ended March 31, 2004 was $225,104, an improvement over prior year operating loss of $605,988. This improvement is attributable to increased revenues during the current period. The operating subsidiary, PlanGraphics of Maryland, contributed $12,664 of the net operating loss as of March 31, 2004, an improvement over its prior year operating loss of $421,843. Interest expense amounted to $131,964 in the current period and compares favorably with $130,978 during the same period of the prior year. Other income increased from the prior year total by $16,977 as a result of income from our investment in Jobview.com and increased royalty income, coupled with commissions from our in-house travel reservation agent activities. On a consolidated basis, we incurred a net loss of $313,658 for the six months ended March 31, 2004 as compared the net loss of $710,533 for the prior year period. The impacts noted above account for the reduction in the net loss. For the same period, the operating subsidiary, PlanGraphics of Maryland, incurred a net loss of $83,915, a significant improvement over its prior year net loss of $580,722 13 Income Taxes and Deferred Tax Valuation Allowance -- FY 2004 and FY 2003 We have net operating loss carryforwards of approximately $13.1 million as of March 31, 2004 versus $12.8 million at September 30, 2003 (See Note E to the Condensed and Consolidated Financial Statements in our Form 10-KSB for September 30, 2003). We have established a 100% valuation allowance on the net deferred tax asset arising from the loss carryforwards in excess of the deferred tax liability. The valuation allowance has been recorded, as our management has not been able to determine that it is more likely than not that the deferred tax assets will be realized. As a result, no provision or benefit for federal income taxes has been recorded for the three months ended March 31, 2004. Critical Accounting Policies and Estimates We do not have any updates to the Critical Accounting Policies disclosed in Item 6, Part Two of our Annual Report on Form 10-KSB for September 30, 2003 and filed with the SEC. ITEM 3. CONTROLS AND PROCEDURES Inherent limitations of Control Systems We maintain appropriate internal controls and disclosure controls, and related procedures, that are designed to ensure that financial and other information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported promptly and properly to meet the current requirements. Such controls and procedures, no matter how well designed and operated, may have inherent limitations in a cost-effective control system, and therefore misstatements due to error or fraud may occur and not be detected. See the expanded discussion in Item 14 of Part Two in our Form 10-KSB for September 30, 2003. Evaluation of Disclosure Controls and Procedures Based on their most recent evaluation, which was completed as of the end of the period covered by this report, and subject to the limitations above, both the company's Chief Executive Officer and Senior Financial Officer believe that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) are effective in timely alerting management to material information required to be included in this Form 10-QSB and other Exchange Act filings. Changes in Internal Controls Based upon their most recent evaluation, which was completed as of the end of the period covered by this report, and subject to the limitations above, both our Chief Executive Officer and Senior Financial Officer believe that there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any significant deficiencies or material weaknesses of internal controls that would require corrective action. In response to certain internal control deficiencies noted during the year end audit process for our September 30, 2003 annual report, we made the following changes in our internal controls: o We changed our procedures to insure that agreements are reviewed by accounting and financial staff for application of generally accepted accounting principles prior to execution and that such review is documented. o We added a requirement to our periodic closeout procedures checklist for the accounting department that prompts personnel to review record balances for potential journal entries needed for non-routine accounts. We have begun the extensive process of documenting and evaluating our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act for fiscal year 2005. Section 404 requires an annual management report of the effectiveness of our internal controls over financial reporting and that our independent registered public accounting firm attest to the accuracy of management's evaluation report. 14 PART II- OTHER INFORMATION ITEM 6. EXHIBIT INDEX. (a) Exhibits: Exhibit 31.1,Section 302 Certification for the principal executive officer, dated August 8, 2005, and filed on page 16 of this report. Exhibit 31.2, Section 302 Certification for the principal financial officer, dated August 8, 2005, and filed on page 17 of this report. Exhibit 32.1, Sarbanes-Oxley Section 906 Certification for Chief Executive Officer, dated August 8, 2005 and filed on page 18 of this report. Exhibit 32.2, Sarbanes-Oxley Section 906 Certification for principal financial officer, dated August 8, 2005 and filed on page 19 of this report. 15 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PLANGRAPHICS, INC. Dated: August 8, 2005 /S/ Fred Beisser ---------------------------------- Frederick G. Beisser Senior Vice President-Finance, Secretary & Treasurer (principal financial accounting officer) 16 EX-31.1 2 plang30431-1.txt RULE 13A-14(A)/15D-14(A) CERTIFICATIONS Exhibit 31.1 SECTION 302 CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER I, John C. Antenucci, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of PlanGraphics, Inc. 2. Based on my knowledge, this quarterly 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 annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures 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 quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date. 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: August 8, 2005 /s/ John C. Antenucci ----------------------------------- John C. Antenucci President and Chief Executive Officer 17 EX-31.2 3 plang30431-2.txt RULE 13A-14(A)/15D-14(A) CERTIFICATIONS Exhibit 31.2 SECTION 302 CERTIFICATE OF THE PRINCIPAL FINANCIAL & ACCOUNTING OFFICER I, Frederick G. Beisser, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of PlanGraphics, Inc. 2. Based on my knowledge, this quarterly 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 annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly 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 quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures 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 quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date. 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: August 8, 2005 /s/ Fred Beisser ----------------------------------- Frederick G. Beisser Senior Vice President - Finance (principal financial officer) 18 EX-32.1 4 plang30432-1.txt SECTION 1350 CERTIFICATIONS Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of PlanGraphics, Inc. (the "Company") on Form 10-QSB for the period ending March 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) 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 result of operations of the Company. /s/ John C. Antenucci - -------------------- John C. Antenucci Chief Executive Officer August 8, 2005 19 EX-32.2 5 plang30432-2.txt SECTION 1350 CERTIFICATIONS Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of PlanGraphics, Inc. (the "Company") on Form 10-QSB for the period ending March31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) 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 result of operations of the Company. /s/ Fred Beisser - ----------------------------- Frederick G. Beisser Senior Vice President - Finance (principal financial officer) August 8, 2005 20 -----END PRIVACY-ENHANCED MESSAGE-----