-----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, ThJabeGIzrl8+was7WV67iVhqGHS4JNhAQ1T7YVthhYPU7XoPslafyMk1GD020KS /mpYU6aC2HkVt/n3yTmx6Q== 0001000096-06-000007.txt : 20060104 0001000096-06-000007.hdr.sgml : 20060104 20060104161123 ACCESSION NUMBER: 0001000096-06-000007 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20050331 FILED AS OF DATE: 20060104 DATE AS OF CHANGE: 20060104 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: 06507821 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 plang305.txt FORM 10-QSB (3-31-2005) 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, 2005. 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. Yes [ ] No [X] Indicate by check mark whether the small business issuer is a shell company (as defined in Exchange Act Rule 12b-2) Yes [ ] No [X] Indicate by check mark whether the small business issuer is an accelerated filer (as defined in Exchange Act Rule 12b-2) Yes [ ] No [X] Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] 97,214,418 shares of common stock were outstanding as of December 22, 2005. Number of pages in this report is 21 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 liquidity caution included in Note B to our financial statements for the year ended September 30, 2004; o we may experience subcontractor work stoppages as a result of delayed payments to them; o we may lose customers or fail to grow our customer base; o we may not be able to sustain our current operations 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, 2004 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 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 11 Item 3. Controls and Procedures 15 Part II Other Information 16 Item 6. Exhibits Index 16 Signature Page 17 Exhibits 18 3
Part I Financial Information Item 1. Financial Statements PLANGRAPHICS, INC. Consolidated Balance Sheet March 31, 2005 ------------ ASSETS (Unaudited) CURRENT ASSETS Accounts receivable, net $ 2,983,501 Prepaid expenses and other 88,351 ------------ Total current assets 3,071,852 ------------ PROPERTY AND EQUIPMENT Land and building under capital lease - related party 1,866,667 Equipment and furniture 905,000 ------------ 2,771,667 Less accumulated depreciation and amortization 1,862,449 ------------ 909,218 ------------ OTHER ASSETS Goodwill 1,907,107 Software, for future project use, net of accumulated amortization of $74,802 244,805 Other 87,366 ------------ 2,239,278 ------------ TOTAL ASSETS $ 6,220,348 ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable - current maturities $ 35,569 Obligations under capital lease - related party, current 148,489 Accounts payable 2,700,223 Accrued payroll costs and vacations 382,067 Accrued expenses 335,656 Deferred revenue and prebillings 1,011,703 ------------ Total current liabilities 4,613,707 ------------ LONG-TERM LIABILITIES Long-term obligations under capital leases - related party, less current maturities 1,001,700 Notes payable, less current maturities 150,000 ------------ Total long-term liabilities 1,151,700 ------------ COMMITMENTS AND CONTINGENCIES -- ------------ TOTAL LIABILITIES 5,765,407 ------------ 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 Accumulated deficit (20,233,177) ------------ Total Shareholders' Equity 454,941 ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,220,348 ============ 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 ---------------------------- ---------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Revenues $ 3,473,903 $ 4,240,971 $ 1,714,116 $ 2,110,120 Cost of sales: Direct contract costs 2,376,245 2,870,356 1,057,851 1,342,564 Salaries and employee benefits 813,464 931,332 403,143 458,444 General and administrative expenses 444,455 426,296 233,988 195,271 Marketing expenses 63,399 88,267 22,710 49,669 Other operating expenses 151,827 149,824 77,382 71,721 ------------ ------------ ------------ ------------ Total costs and expenses 3,849,390 4,466,075 1,795,074 2,117,669 ------------ ------------ ------------ ------------ Operating loss (375,487) (225,104) (80,958) (7,549) ------------ ------------ ------------ ------------ Other income (expense): Other income 53,206 43,410 30,347 6,504 Interest expense (118,268) (131,964) (64,247) (65,965) ------------ ------------ ------------ ------------ (65,062) (88,554) (33,900) (59,461) ------------ ------------ ------------ ------------ NET LOSS $ (440,549) $ (313,658) $ (114,858) $ (67,010) ============ ============ ============ ============ Basic and diluted loss per common share $ (0.00) $ (0.00) $ (0.00) $ (0.00) ============ ============ ============ ============ Weighted average number of shares of common stock outstanding for: Basic and diluted 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, 2005 2004 ----------- ----------- Cash flows provided by operating activities: Net loss $ (440,549) $ (313,658) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 147,753 149,824 Changes in operating assets and liabilities Accounts receivable 420,256 143,497 Prepaid expenses and other (61,036) (37,353) Other assets (3,476) 13,179 Accounts payable 588,645 644,170 Accrued expenses (291,454) (412,576) Deferred revenue and prebillings 465,101 (77,513) ----------- ----------- Net cash provided by operating activities 825,240 109,570 ----------- ----------- Cash flows used in investing activities: Purchases of equipment (1,720) (2,895) Addition to software held for future use -- (28,084) ----------- ----------- Net cash used in investing activities (1,720) (30,979) ----------- ----------- Cash flows used in financing activities: Proceeds from debt 1,650,900 2,048,634 Payments on debt (2,412,450) (2,133,611) Payments on note payable - related parties (9,000) (138,400) Payments on obligations under capital lease (72,527) (64,498) Repayment of note receivable for stock purchase -- 182,750 ----------- ----------- Net cash used in financing activities (843,077) (105,125) ----------- ----------- Net decrease in cash (19,557) (26,534) Cash and cash equivalents at beginning of year 19,557 28,216 ----------- ----------- Cash and cash equivalents at end of period $ -- $ 1,682 =========== =========== 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, 2004, on Form 10-KSB filed with the Securities and Exchange Commission. Readers are herewith notified to read the "liquidity caution" caution in Note B to our financial statements for the year ended September 30, 2004. 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, 2005. 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, 2005 ---------- Unaudited Contract receivables: Due from factor $ 112,691 Unfactored billed receivables 1,676,856 Unbilled 1,193,954 ---------- 2,983,501 Less allowance for doubtful accounts -- ---------- Accounts receivable, net $2,983,501 We have historically received greater than 10% of annual revenues from one or more customers. The following clients provided more than 10% of our revenue for the three months ended March 31, 2005: City of New York Department of Environmental Protection (NYCDEP) 39%, World Bank funded projects in China 15% and the Oregon Geospatial Enterprise 11%. 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. In addition, at March 31, 2005 the following clients comprised 10% or more of our billed accounts receivable: NYCDEP 19% and the Italian Ministry of Finance (SOGEI) 10%. At March 31, 2004, NYDOITT accounted for 35% of billed accounts receivable; NYDOITT has been the largest of our 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. 7 Deferred revenue amounts are $1,011,703 at March 31, 2005 and represent amounts billed in excess of amounts earned. The increase over the prior year is a result of our sales of certain software paid in advance that also requires future performance of services. (3) Provision for Income Taxes At the beginning of this fiscal year we had net operating loss carryforwards of $13.9 million with expirations through 2026. At March 31, 2005, the amount of the net operating loss carryforward balance is estimated at $14.2 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, 2004 and at March 31, 2005. As a result, no provision or benefit for income tax has been recorded for the three and six month periods ended March 31, 2005. (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, 2004. We recently entered into an agreement in principle with our Frankfort facility landlord to terminate the capital lease and execute a new lease for approximately one half of the space we have historically occupied (see Note 10, Subsequent Events, below). (5) 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, 2005 and 2004, were 13,142,803 and 12,253,803, 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 ------------------------------------------------- 2005 2004 2005 2004 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 losses in the three and six month periods ended March 31, 2005 and 2004 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. (6) 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 and directors from stock option plans for the periods presented, as the options 8 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, 2005 and 2004, 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 2005 2004 2005 2004 ---------- ---------- ---------- ---------- Net loss: As reported $ (440,549) $ (313,658) $ (114,858) $ (67,010) Incremental Compensation Expense (36,382) (34,382) (18,169) (17,191) ---------- ---------- ---------- ---------- Pro forma $ (476,931) $ (348,040) $ (133,027) $ (84,201) ========== ========== ========== ========== Basic loss per share: As reported $ (0.00) $ (0.00) $ (0.00) $ (0.00) ========== ========== ========== ========== Pro forma $ (0.00) $ (0.00) $ (0.00) $ (0.00) ========== ========== ========== ========== Diluted loss per share As reported $ (0.00) $ (0.00) $ (0.00) $ (0.00) ========== ========== ========== ========== Pro forma $ (0.00) $ (0.00) $ (0.00) $ (0.00) ========== ========== ========== ==========
(7) Supplemental Cash Flow Information During the six months ended March 31, 2005, PlanGraphics paid $113,466 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." 9 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 (8) Recently Issued Accounting Pronouncements SFAS 123R, "Share-Based Payment" (Revised 2004). Statement of Financial Accounting Standard No. 123 (SFAS No. 123R) was revised in December 2004. We adopted the disclosure provisions of SFAS 123 when it became effective in 1996 but continue to account for stock options under APB No. 25. Currently, under an exemption written into the guidance for qualifying stock option grants with no intrinsic value on the date of grant, SFAS No. 123 requires us to present pro forma share-based compensation expense determined under the fair value approach for our stock option program in the notes to our financial statements. We expect to choose the modified prospective method of adoption of SFAS No. 123R, therefore, beginning in the first quarter of 2006, we will be required to record stock related costs in our income statement. While under current guidance we have used the Black-Scholes method to calculate pro forma compensation expense, the new guidance will also allow other methods, such as the binomial method. We are evaluating the alternative methods to value stock options and do not presently know the impact of changing our current method. In April 2005, the SEC issued a press release announcing that it would provide for phased-in implementation guidance for Statement 123(R). The SEC would require that registrants that are small business issuers adopt Statement 123(R)'s fair value method of accounting for share-based payments to employees no later than the beginning of the first fiscal year beginning after December 15, 2005. The Company intends to adopt Statement 123(R) on October 1, 2006. SFAS No. 154 "Accounting for Changes and Error Corrections--a Replacement of APB Opinion No. 20 and FASB Statement No. 3." SFAS No. 154 was issued in June 2005 and requires retrospective application of voluntary changes in accounting principles, unless impracticable. SFAS No. 154 supersedes the guidance in APB Opinion No. 20 and SFAS No. 3; but does not change any transition provisions of existing pronouncements. Generally, elective accounting changes will no longer result in a cumulative effect of a change in accounting in the income statement, because the effects of any elective changes will be reflected as prior period adjustments to all periods presented. SFAS No. 154 will be effective beginning with our 2006 fiscal year and could affect any accounting changes that we elect to make thereafter. In June 2005, the Emerging Issues Task Force ("EITF") issued EITF 05-6, Determining the Amortization Period of Leasehold Improvements ("EITF 05-6"). EITF 05-6 requires that assets recognized under capital leases generally be amortized in a manner consistent with the lessee's normal depreciation policy except that the amortization period is limited to the lease term (which includes renewal periods that are reasonably assured). EITF 05-6 also addresses the determination of the amortization period for leasehold improvements that are purchased subsequent to the inception of the lease. Leasehold improvements acquired in a business combination or purchased subsequent to the inception of the lease should be amortized over the lesser of the useful life of the asset or the lease term that includes reasonably assured lease renewals as determined on the date of the acquisition of the leasehold improvement. The Company has determined EITF 05-6 will not materially impact its financial position or results of operations. Management has reviewed remaining accounting pronouncements issued during the six months ended March 31, 2005, and determined that no others were applicable to our present operations. (9) Accounts Receivable Agreement 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, 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 invoices for which PlanGraphics is immediately paid 80% of the face value. Upon collection of the invoices the remaining 20% of each invoice, less varying levels of discount dependent upon the age of the receivables at the time of collection ranging from 0.90% to 5.40%, is remitted to PGI. The agreement includes a requirement for PGI to submit a minimum of $500,000 of invoices each month; if the minimum is not met during a three-month period, certain additional fees apply. Invoices not paid within 90 days of the invoice date are subject to either repurchase by PGI or replacement with an invoice of like or higher value. This agreement was subsequently modified and Rockland Credit Financing LLC, a minority participant in the KCap financing agreement, became the lead financial institution with KCap becoming the subordinate. The agreement is automatically extended for one additional 12-month period. As of March 31, 2005 invoices amounting to approximately $1,429,107 had been purchased by Rockland and $112,691 was due from Rockland. (10) Subsequent Events Letter of Intent. On October 18, 2004, we entered into a non-binding letter of intent with IceWEB, Inc. ("IWEB"), 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. Leased Facilities. During May 2005 PGI-MD reached an agreement in principle with its landlord, Capital View Development LLC ("CVD") regarding our leased facilities in Frankfort, Kentucky. The terms agreed to will provide for termination of the existing lease and forgiveness of approximately $49,000 in past due lease payments. The terms of the agreement in principle also provide for a new lease to be effective June 1, 2005 for approximately 10,500 square feet (rather than the 20,500 previously occupied) resulting in a reduction of future lease costs by approximately $197,000 annually from the previous lease rate. Our chief executive office owns an interest in CVD. Extension of Employment Agreement. On November 9, 2005, our board of directors amended the employment agreement of our President and Chief Executive Officer through September 30, 2006. Sale of Jobview Minority Interest. As reported on Form 8-K dated September 30, 2005, effective September 30, 2005, we sold our minority interest management units owned by us to two individuals in exchange for total payment of $198,250. Pursuant to the terms of the Agreement, we are also entitled to receive all financial distributions related to our ownership of the units for all fiscal years ending prior to January 1, 2005 and for the fiscal year ended December 31, 2005, notwithstanding the fact that we will not own the units at the end of such fiscal year. (11) Foreign Currency Translation Assets and liabilities of the Company's foreign subsidiary are translated at the rate of exchange in effect at the end of the period. Net sales and expenses are translated at the average rate of exchange for the period. All foreign currency transactions and translation adjustments were not considered material as of the end of the reporting period. 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, 2005 and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes for the period ended September 30, 2004. Those prior year financial statements included a liquidity 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. As a result, from time to time we have experienced delays in making payments of payrolls and amounts owed to subcontractors. Cash Flow We continue to experience very constrained cash flows, primarily as a result of a major project for which we do not receive periodic progress payments, causing us to finance the resources needed with funds from operations. As a result from time to time we have delayed payrolls and payment of subcontractor invoices. As of March 31, 2005 we had a net working capital deficit of $(1,541,855) versus a net working capital deficit of $(1,168,114) at September 30, 2004 and a working capital deficit of $(542,606) at March 31, 2004. The further decrease in 11 working capital deficit since March 31, 2004 resulted primarily from growth in current liabilities exceeding that in current assets caused our need to fund a certain major project from cash generated internally from operations because the project did not have progress payments authorized. In the six months ended March 31, 2005, operations provided net cash of $825,240, as compared to $109,570 provided by operations in the period ended March 31, 2004. This increase in cash provided was a result of the growth in accounts payable, the collection of accounts receivable and the advance payments received for software packages requiring future services seen in our deferred revenue growth all of which were partially offset by operating loss. As the Company continues its transition to a blend of software solutions using Xmarc and derivative application products as well as its traditional professional services, we anticipate that the high margin software licensing revenue will mitigate cash flow constraints. In the six month period ended March 31, 2005, net cash used in investing activities was $1,720 as compared to $30,979 of net cash used in investing activities in the period ended March 31, 2004. Increases to software held for future use accounted for the change. Financing activities in the period ended March 31, 2005 used $843,077 as compared to net cash of $105,125 used by financing activities in the period ended March 31, 2004. Payment of the remaining balance of our expired line of credit was the primary reason for the increase in cash used. Accounts receivable balances at March 31, 2005 and 2004, 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, 2005 our accounts receivable were $2,983,501 inclusive of work-in-process. During the current quarter billed receivables in arrears greater than 60 days were reduced from $916,730 at September 30, 2004 to $636,042 and no client accounted for more than $123,806. As of March 31, 2005, the number of days sales outstanding (DSO) were at approximately 155 days, as compared to 161 days a year prior and 159 days at September 30, 2004. 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. From time to time we have also borrowed funds from officers and employees to meet working capital needs. During the fiscal year, we secured a new financing arrangement as noted below. 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, 2005, our cash and cash equivalents had decreased from $19,557 at September 30, 2004. 12 Operations Outlook While we have secured a new financing arrangement (see above) and have raised funds from the sale of our interest in Jobview, we expect that our operations will continue to be impacted by constrained cash flows through the end of calendar year 2005. 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 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, 2005, we had total work backlog and assignments amounting to approximately $15.1 million, decreased from the $15.7 million as of December 31, 2004 reported on our September 30, 2004 Form 10-KSB and from $16.5 million as of March 31, 2004. Approximately $13.8 million of the backlog at March 31, 2005 was funded as compared to $12.4 million a year prior. Of the $15.1 million of backlog, we expect to complete approximately $7.0 million within 14 months. 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. As the company continues its transition to a blend of software solutions using Xmarc and derivative application products as well as its traditional professional services, software contract awards will unlikely be reported in backlog as the sale (booking) and the delivery of software (resulting in recognition of revenue) typically occur within a short period of time. 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. Currently, we plan to grow internally through strategic alliances that enhance shareholder value. Our business alliance with Oracle Corporation has yielded multiple business prospects as has our relationship with the alert notification company Genutec Business Solutions Inc. Further, our 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. Results of Operations Result of Operations for the three months Ended March 31, 2005 Revenues Our revenues decreased $396,004 or 19% from $2,110,120 for the quarter ended March 31, 2004 to $1,714,116 for the quarter ended March 31, 2005. This decrease was caused by the winding down of certain projects while the startup of other projects was delayed by unavailable resources and new work with clients using 13 Xmarc and Steps had not yet been authorized to begin or is at low levels of activity. Concurrently, we are also changing our revenue blend to include higher margin software licenses and maintenance revenue to complement our existing professional services activities which will allow us, over time, to improve gross margins with lower gross revenue Costs and Expenses Total costs and expenses for the quarter ended March 31, 2005 amounted to $1,795,074, a decrease of $322,595 from the $2,117,669 for the quarter ended March 31, 2004 driven primarily by decreased direct contract costs. This 15% decrease compares with the 19% decrease in revenue for the period. The costs associated with the public parent company, PlanGraphics of Colorado, were $76,645 for the period, a decrease of $17,785 from the prior year period of $94,430; the decrease is associated with the decreased audit related expenses and closer management of expenses. Direct contract costs decreased by $284,713, along with the decrease in revenue. Salaries and benefits decreased by approximately $55,301, or 12% as a result of attrition and the shifting of work to subcontractors. General and administrative expenses increased by $38,717, or 20%; marketing expense decreased $26,959, or 54% as conference, proposal and other marketing expenses decreased; and, finally, other operating costs experienced a decrease of $5,661. Net loss On a consolidated basis, our operating loss for the quarter ended March 31, 2005 was $80,958, an increase from the prior year operating loss of $7,549. This change is attributable to decreased revenues during the current quarter. The operating subsidiary, PlanGraphics of Maryland, contributed $4,146 of the net operating loss for the quarter ended March 31, 2005, a decrease from the prior year operating loss of $6,686 for the operating subsidiary. Interest expense amounted to $64,247 in the current quarter and compares with $65,965 during the same period of the prior year. Other income increased from the prior year total by $23,843. On a consolidated basis, we incurred a net loss of $114,858 for the quarter ended March 31, 2005 as compared to the net loss of $67,010 for the prior year period. The impacts noted above account for the increase in the net loss. For the same period, the operating subsidiary, PlanGraphics of Maryland, incurred a net loss of $34,404, a decrease from the prior year period net loss by the operating subsidiary of $85,231. Result of Operations for the six months Ended March 31, 2005 Revenues Our revenues decreased $767,068 or 18% from $4,240,971 for the six month period ended March 31, 2004 to $3,473,903 for the period ended March 31, 2005. This decrease was caused by the winding down of certain projects while the startup of other projects was delayed by unavailable resources and new work with clients using Xmarc and Steps had not yet been authorized to begin or is at low levels of activity. Concurrently, we are also changing our revenue blend to include higher margin software licenses and maintenance revenue to complement our existing professional services activities which will allow us, over time, to improve gross margins with lower gross revenue. Costs and Expenses Total costs and expenses for the period ended March 31, 2005 amounted to $3,849,390, a decrease of $616,685 compared to $4,466,075 for the period ended March 31, 2004, and was primarily caused by decreases in direct contract costs. This 14% decrease compares with the 18% decrease in revenue for the period. The costs associated with the public company, PlanGraphics of Colorado, were $137,129 for the period a decrease from the prior year period of $167,205; the decrease is associated with the reduction in accounting and audit fees coupled with closer management of expenses. Direct contract costs decreased $494,111 or 17% trailing the decrease in revenue. Salaries and benefits decreased by approximately $117,868, or 13%, due to shifting some work to subcontractors during the period. General and 14 administrative expenses increased by $18,159, or 4%, caused mostly by decreases in rent; while marketing expense decreased $24,868, or 28%, from decreases in travel and professional fees; and, finally, other operating costs increased slightly by $2,003 or 1%. Net loss On a consolidated basis, our operating loss for the six month period ended March 31, 2005 was $375,487, declining from the prior year operating loss of $225,104. This change is attributable to decreased revenues during the current period. The operating subsidiary, PlanGraphics of Maryland, contributed $227,808 of the net operating loss as of March 31, 2005, compared to its prior year operating loss of $2,664. Interest expense amounted to $118,268 in the current six month period and compares with $131,964 during the same period of the prior year; the decrease is attributable to the freeze on our former line of credit during the first quarter pending our execution of a new financing arrangement. Other income increased from the prior year total by $9,796 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 $440,549 for the six months ended March 31, 2005 as compared to the net loss of $313,658 for the prior year period. The impacts noted above account for the increase in the net loss. For the same period, the operating subsidiary, PlanGraphics of Maryland, incurred a net loss of $281,652, an increase from its prior year net loss of $83,916. Income Taxes and Deferred Tax Valuation Allowance -- FY 2005 and FY 2004 We have net operating loss carryforwards of approximately $14.3 million as of March 31, 2005 versus $13.9 million at September 30, 2004 (See Note E to the Condensed and Consolidated Financial Statements in our Form 10-KSB for September 30, 2004). 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, 2005. 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, 2004. 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. 15 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. PART II- OTHER INFORMATION ITEM 6. EXHIBIT INDEX. (a) Exhibits: Exhibit 31.1,Section 302 Certification for the principal executive officer, dated December 30, 2005, and filed on page 18 of this report. Exhibit 31.2, Section 302 Certification for the principal financial officer, dated December 30, 2005, and filed on page 19 of this report. Exhibit 32.1, Sarbanes-Oxley Section 906 Certification for Chief Executive Officer, dated December 30, 2005 and filed on page 20 of this report. Exhibit 32.2, Sarbanes-Oxley Section 906 Certification for principal financial officer, dated December 30, 2005 and filed on page 21 of this report. 16 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: December 30, 2005 /S/ Fred Beisser ---------------- Frederick G. Beisser Senior Vice President-Finance, Secretary & Treasurer (principal financial accounting officer) 17 EX-31.1 2 plang30531-1.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: December 30, 2005 /s/ John C. Antenucci ----------------------------------- John C. Antenucci President and Chief Executive Officer EX-31.2 3 plang30531-2.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: December 30, 2005 /s/ Fred Beisser ----------------------------------- Frederick G. Beisser Senior Vice President - Finance (principal financial officer) EX-32.1 4 plang30532-1.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, 2005 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 December 30, 2005 EX-32.2 5 plang30532-2.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 March 31, 2005 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) December 30, 2005 -----END PRIVACY-ENHANCED MESSAGE-----