-----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, I82e75AeVIRprjUv9lAH6eJD9pnAj8Z1AuBAQzH1L5daNX+NKjPJI1wAp4oNmP1G Il0wqrnnExr6n96SOMfc/g== 0001000096-09-000011.txt : 20090116 0001000096-09-000011.hdr.sgml : 20090116 20090116105615 ACCESSION NUMBER: 0001000096-09-000011 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 20080930 FILED AS OF DATE: 20090116 DATE AS OF CHANGE: 20090116 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: 0906 FILING VALUES: FORM TYPE: 10KSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14273 FILM NUMBER: 09530132 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 10KSB 1 plangraphics93008.txt FORM 10-KSB (9/30/08) ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-KSB (Mark One) [X] Annual report pursuant to section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended September 30, 2008, [ ] 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. ----------------------------- (Name of small business issuer) Colorado 84-0868815 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 112 East Main Street Frankfort, Kentucky 40601 - ----------------------------------------------------------- --------------- (Address of principal executive offices) (Zip code) - -------------------------------------------------------------------------------- Issuer's telephone number: (720) 851-0716 Securities registered under Section 12(b) of the Exchange Act: None Securities registered under Section 12(g) of the Exchange Act: Title of each class: Name of Exchange on which registered: -------------------- ------------------------------------- Common Stock, no par value (None) Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. [ ] Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities and Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ X ] No [ ] Check if there is no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is not contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB. [X ] The issuer's revenues for its most recent fiscal year were $3,614,016. Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X] As of December 31, 2008, the aggregate market value of the shares of the issuer's voting stock held by non-affiliates of the issuer based on the closing price of the Common Stock as reported on The Over The Counter Bulletin Board was approximately $90,690. As of December 31, 2008 the issuer had outstanding 99,158,706 shares of Common Stock. Documents incorporated by reference: None Transitional Small Business Disclosure Format: Yes [ ] No [ X ] ================================================================================ CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-KSB 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-KSB regarding: o availability of working capital to meet our immediate cash and liquidity needs; o our ability to raise funds through debt and equity financing; o estimates regarding our financing needs; o our prospects for possible growth; o our ability to reduce costs and expenses; o the collectibility of our accounts receivable; o cancellation of our contracts and order assignments; o the continuation of our relationship with the City of New York and other key customers; o the increase in competition and our ability to compete effectively; o our ability to take advantage of spatial information technology markets; o the strength of our technical expertise and customer service; o the ability of information technology to benefit from geospatial capabilities within their technologies; o the potential gross profit margin in information technology; o the projections regarding our financial results for fiscal years ("FY") 2009; o fluctuations in exchange rates; o the impact of recent accounting pronouncements; and o the availability and affordability of alternative lease facilities. Although we believe that the expectations that we express in these forward-looking statements are reasonable, we cannot promise that our expectations will turn out to be correct or will be accomplished in the time frame we contemplate. Our actual results could be materially different from our expectations, including the following: o we may continue to experience very constrained cash flows and may not overcome the underlying causes; o we may not be able to obtain needed financing; o we may not achieve continued profitability; o we may experience work stoppages by subcontractors due to late payments; o we may lose customers or fail to grow our customer base; 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; and o we may issue a substantial number of shares of our common stock upon exercise of options and warrants, thereby causing dilution in the value of your investment. 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 this Annual Report on Form 10-KSB under the caption "Item 1. Description of Business - Risk Factors" beginning on page 9, our other Securities and Exchange Commission filings, and our press releases. i TABLE OF CONTENTS Page CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS...........................I PART I ..................................................................1 ITEM 1 -- DESCRIPTION OF BUSINESS..........................................1 RISK FACTORS...............................................................8 ITEM 2 - DESCRIPTION OF PROPERTY..........................................11 ITEM 3 - LEGAL PROCEEDINGS................................................12 ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............12 PART II ..................................................................12 ITEM 5 -- MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.....................................12 ITEM 6 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.......13 ITEM 7 -- FINANCIAL STATEMENTS............................................25 ITEM 8 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.............................25 ITEM 8A - Controls and Procedures ........................................25 PART III .................................................................27 ITEM 9 -- DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT ...............................................27 ITEM 10 -- EXECUTIVE COMPENSATION.........................................28 ITEM 11 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.37 ITEM 12 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.................37 ITEM 13 -- EXHIBITS.......................................................38 ITEM 14 -- PRINCIPAL ACCOUNTANT FEES AND SERVICES.........................40 SIGNATURES................................................................41 ii PART I ------ ITEM 1 -- DESCRIPTION OF BUSINESS The Company PlanGraphics, Inc. ("PGRA"), a life-cycle systems integration and implementation firm, provides a broad range of services in the design and implementation of information technology ("IT") within the public and commercial sectors. PGRA's customers primarily include federal, state and local governments, utility companies, and commercial enterprises in the United States and foreign markets that require locational or "spatial" information. PGRA's capabilities include business and web-enabled solutions that exploit the advanced technologies of spatial information management systems (otherwise known as geographic information systems), data warehousing, electronic document management systems and internal and external networks. PGRA specifically focuses on providing customers with assistance in the design, development, and implementation of software applications, databases and data warehouses, and secure data communication networks that manage, access, and use spatial (locational) information assets. Reports filed with the Securities and Exchange Commission by PGRA via EDGAR are available at no charge on our website (www.PlanGraphics.com) shortly after filing as well as at www.sec.gov. Business Development The Company was originally incorporated as DCX, Inc., a Colorado corporation, on December 8, 1981. On September 22, 1997, DCX, Inc. acquired all of the outstanding shares of PlanGraphics, Inc., a Maryland corporation ("PGI-MD") with headquarters in Frankfort, Kentucky. PGI-MD, founded in 1979, developed an early focus on turnkey information technology implementations, with a particular focus on the then-new spatial information management technologies known as geographic information systems ("GIS") and automated mapping/facilities management ("AM/FM") systems. Since those first projects more than two decades ago, PGI-MD has continually expanded its range and scope, both through helping clients implement promising new technologies (such as GIS, geographic position systems ("GPS"), digital orthophotography, high-resolution satellite imagery, data warehousing, and the Internet) as they have become available, and through vigorous pursuit of new methods, approaches, and capabilities as both GIS and IT have become more integrated and more suited to enterprise-wide applications. After the acquisition of PGI-MD, we changed our name from DCX, Inc. to Integrated Spatial Information Solutions, Inc. Subsequently, on May 2, 2002, we again changed our name to PlanGraphics, Inc. The principal business of PlanGraphics, Inc. is carried out through PGI-MD and its subsidiary Xmarc Ltd. PGI-MD provides design, implementation, and integration of e-government and information technology solutions, principally to state and local governments and public utilities. To date, the firm has managed more than 1,475 projects for a wide range of state and local, federal and international customers. Xmarc provides middleware and spatial visualization tools used by PlanGraphics and end users in a broad array of spatially enabled solutions. We will often use pronouns such as "we," "us," and "our" in this annual report to refer to the parent company, PlanGraphics, Inc., together with our operating subsidiary, PGI-MD. Business of Issuer Introduction and Background We offer project life-cycle information technology solutions, with a focus on spatial information management (SIMS) technologies, including GIS. We specialize in web-enabled GIS and IT applications that integrate and facilitate the access, analysis, and interpretation of disparate data sets. 1 Spatial information management systems ("SIMS"), which include GIS, provide a means for managing and analyzing information by relating the geographic location of a feature or event to other descriptive information. GIS software allows data, in both graphic or map format and alphanumeric data to be combined, segregated, modeled, analyzed and displayed, thus becoming useful information for managers. Once largely limited to local and state government agencies and large utility companies responsible for land and physical asset management, the use of GIS and other spatial information systems has become widespread. For example, GIS is being used by utility companies to acquire and retain high-margin customers, to analyze demographic attributes of potential customers and match the results with facility capacity, and to identify where facility capacity needs to be expanded. State and local governments use the technology for dispatching police and fire resources, responding to catastrophic events, insuring parity in tax appraisals and locating facilities in areas suitable for development. Anticipating Emerging Trends We are focusing our services on meeting the information and systems integration needs of the public and private sectors by leveraging our e-services capabilities and specialization in spatial information systems for solutions with an enterprise-wide focus requiring interoperability across systems and data sources. We believe that information technology, which includes both SIMS and GIS, continues to be a global market that is rapidly evolving and is becoming the basis for a myriad of new applications and services to solve customer problems and creating additional markets. The migration of GIS technology into the mainstream is creating opportunities for government agencies to streamline their operations, while providing better access to services for constituents. At the same time, broader use of GIS data by non-specialists is offering additional opportunities for companies to develop user-friendly, standardized GIS products that respond to the growth of the marketplace. GIS has proven increasingly useful in government activities in recent years. Local, county and regional agencies are willing to share data as a means of cost control as well as interoperability. We view mapping as the GUI (graphic user interface) to a myriad of users and applications because it allows users to visualize data in a manner that is familiar and well understood, thus providing an easy point of entry for organizing and manipulating data into useful information. Although the adoption of GIS technology has grown steadily over the years, it too, has become the victim of dramatic revenue shortfalls in state and local government. And though some entities are making the case that the adoption or expansion of GIS is cost effective, many organizations are drawing out or suspending new development. Reduced activity in land development and housing industry has also negatively impacted private sector adoption and level of use and expansion of spatial technologies. At the same time the trend to enable access to spatial information data repositories via the Internet continues. Local and state governments are starting to think more like businesses. Increasingly, municipalities are using location-based applications to make life easier for their constituents. They want to provide answers for people who need answers, and they are working to be user-friendly, more efficient, and more cost-effective. As a component of other systems, GIS helps to accomplish these goals. Since about 80% of local government data is location-based, it makes sense to work with GIS data. We believe that our long-standing reputation and technical qualifications will be of value in the stressed market place - but more importantly the client relationships we have established and maintained over the years may prove beneficial in maintaining a critical mass of skills and engagements during the economic downturn. Principal Products or Services and Their Markets Our core SIMS competencies in IT services and GIS consulting cover all stages of the project development life-cycle, and can be summarized as follows: o enterprise spatial systems integration, including systems design through testing and operation as well as the migration of legacy systems to new systems; o spatial database management and integration; 2 o information systems that support emergency management and public safety including assessment, planning, response, and recovery; o executive decision support systems and executive dashboards supporting decision-making and constituent/customer relations; o spatial application development, including web deployment for the internet, intranet, and extranet applications; o asset management systems for physical, infrastructure and real property information; and o document and work management systems. Detailed Explanation of Core Competencies 1) IT Services We provide a full range of system and data integration services from needs assessment to operation and maintenance of IT solutions, particularly those that leverage spatial information assets. Our full life-cycle services include: o o Enterprise Architecture and o Database design and development Management Consulting o Strategic planning o Applications development o Needs assessment and customization o Requirements analysis o Data conversion management o System design and QA/QC o Implementation planning o Training o Project/program management o On-site staffing/ o Integration/Interface design outsourcing Development and execution 2) Geographic Information Systems ("GIS") Consulting Services The development, implementation, and integration of GIS services have been at the core of our primary focus for almost 30 years. From initial consultation on strategy, through system implementation and integration, we offer a full spectrum of GIS consulting and implementation services to help our clients plan and implement GIS. Our consulting services include the following: o Concept o Development o Strategy and reengineering o System procurement o Planning and installation o Requirements analyses o Data acquisition o Feasibility studies o Data quality control o Applications definition /quality assurance o Implementation planning o Application design o Design and development o Hardware specifications o Web enabling/interfaces o Software specifications o Training o Data specifications o Operation and Support o System administration o Database administration and maintenance o System upgrades and expansion o System audits Development and Acquisition of Proprietary Products and Tools At the core of our solutions and applications are three interrelated capabilities and technologies. Since its inception the foundation of PGI-MD has--and continues to be--its expertise in SIMS, GIS and management consulting. 3 We expanded our range and scope of services as GIS and IT have become more integrated, which has led to our expansion and focus on broader IT solution services that leverage spatial information. We have developed, acquired, and/or partnered to gain access to a set of proprietary integration tools that enhance our GIS and IT Services. Combined with our proprietary Methodology and Document Management Improvements ("MDMI") processes, these services and technologies enable us to offer our customers a comprehensive set of solutions. We utilize a wide span of third party "best of breed" technologies to accomplish unique approaches to spatial data integration. We have developed significant expertise in large relational databases such as Oracle and their spatially enabled products, such as Oracle Spatial. In addition, we have deployed Xmarc's enterprise spatial integration tool kit, for use in conjunction with third party GIS and database software which makes multi-platform spatial data more accessible. We have also developed a number of strategic business partnerships with product and service suppliers which facilitate rapid deployment of technologies and resources on behest of our customers. In 2003, we acquired the intellectual property and associated assets of Xmarc's spatial integration tools. We are using and further developing the technology as an integration tool set for a wide range of e-government and e-commerce solutions that are multi-platform and need access to large and distributed data sets. These include our own deployment of Xmarc as part of SIMS solutions and enterprise executive dashboards as well as the solutions of third party providers. We make the integration tool kit available to our clients and to third party distributors and value added resellers worldwide. We support existing Xmarc contracts and work in progress in North America, Europe and Xmarc distributors in Asia-Pacific. Since our acquisition of the product, we have developed seven new releases, the most recent being Xmarc version 7.1.2 (released to existing customers in October, 2008 ) as well as several solution specific derivative products including Spatial Template for Emergency Preparedness ("STEPS"), an application for emergency response and public safety). Functional Capabilities and Solutions We leverage our core capabilities and technologies to deliver solutions in four functional areas: Emergency Management, Non-Emergency Information Management, Asset Management, and Enterprise Data Dissemination solutions. 1) Emergency Management Solutions We provide broad strategic and tactical support to emergency planning and response organizations at the local and state level, as well as designing and implementing GIS databases to support Emergency Operation Center applications and databases. Our GIS applications, such as STEPs, are often used to support emergency services (police and fire) in the planning and response to natural and man-induced disasters. Since the events of September 11, 2001, the value of integrated GIS technology in supporting emergency services and public safety organizations has become more valuable than ever. PlanGraphics' GIS applications are used in the following areas of emergency management: o Emergency planning and risk assessment o Emergency operations support o Emergency dispatch o Tactical/field operations support o Impact analysis o Disaster response and citizen support o Damage assessment and recovery 2) Non-Emergency Information Management Applications We provide a diverse set of Non-Emergency Information Management applications, ranging from Web-enabled constituent support applications 4 (sometimes grouped under the term "e-government") to decision support tools and methods for environmental compliance, property assessment and mapping, planning and development, among others.. Constituent Support Applications These applications, which typically involve dedicated websites, give citizens access to a wide variety of information about government services, facilities, and infrastructure. Emerging systems in this functional area, in which PlanGraphics has expertise, include: o Executive Dashboards and Portals. These solutions provide a common and single user interface to a broad range of legacy data, typically correlated using location or geography among other data attributes. PlanGraphics STEPs is one such example. o Public Information Systems. For example, the "My Neighborhood Statistics" application, which was unveiled in New York City in September 2002, and supported over 400,000 inquiries in its first 24 hours of operation. o Virtual Data Warehouse. By leveraging both the internal and external networks of certain customers we have developed information exchanges that bridge disparate databases and legacy applications. 3) Asset Management We provide applications that address the property records and management of tangible property and infrastructure, such as sewers, water, roads, signs, traffic signals, and land. These applications provide the core functionalities for asset inventory, as well as other functional components that support this core: o Inventory o Title/ownership o Legal framework o Property surveys and records o Monitoring o Infrastructure inspection o Work scheduling and work order management o Document and records management We have implemented and integrated off-the-shelf asset management and work management software packages from numerous third party companies. We also have extensive experience in working with other "core technologies" and in integrating commercial software packages and databases, such as: o relational database management systems ("RDBMS") with a particular focus on Oracle, DB2, and SQL Server; o GIS, including Oracle Spatial and GIS software from ESRI, Intergraph, MapInfo, and AutoDesk; and o computer-aided drafting and design ("CADD") focusing on standards for import and export of engineering documents. For real property information systems, we have worked extensively with computer-aided mass appraisal, street address assignment and management systems and other land management applications that are often integrated with GIS, including development and review, valuation data, permitting, and code compliance. In the area of facilities and infrastructure, our expertise encompasses engineering document management systems with design and development work using software from multiple document management vendors as well as system modeling and analysis software use and integration. 5 4) Enterprise Information Dissemination The convergence of GIS systems and broader information technology applications, particularly data warehousing and Web-based technologies, has significantly expanded the types of users and organizations seeking access to spatial and geographic information. The key to effective applications in this new environment is the ability for users across an enterprise to more effectively locate and use data that resides in diverse data sets and different formats. We recognized the growing demand for the integration of GIS and other disparate data sources, and quickly responded by developing technical capabilities in this emerging area. Characteristics of our applications in this area include: o An "open system" approach independent of specific platforms, operating systems, or applications; o Expansive access to both spatial and non-spatial data sets integrating data elements of different types, from different sources and locations; o Multiple users' ability to access data simultaneously; o Accessibility through various media (e.g., local area network (LAN), internet, intranet, wireless); and o Scalability. Sales and Marketing Approach We conduct our business development using a principal selling model. In doing so, we draw on PGI-MD's president and on executive consultants who have marketing, sales and delivery responsibilities. We also develop business and follow-on assignments through our project managers. In addition, we maintain business relationships with suppliers of software, data and professional services. Our customer service philosophy is to fully understand our customers' needs so that we are able to deliver a high level of value-added services and after-sales support. We believe that highly differentiated customer service and technical support is a key competitive asset. Because both GIS and the Internet are evolving and complex, customers require significant technical support. Consequently, we have developed proprietary methodologies that assure consistency in performance and attain maximum customer satisfaction through attention to customer communication and technical expertise. We continually monitor our customer service strategy through customer satisfaction surveys, frequent contact with the executive consultants and oversight by our senior management. Market Size While Gartner and Daratech, Inc., market research and technology assessment firms, reported the GIS/Geospatial market reached $3.6 billion in 2006, the worldwide market is reportedly expected to grow to between $60 and $100 billion by 2015. According to research from CompassIntelligence.com, public safety organizations in the U.S. will spend roughly $21.3 billion on IT goods and services by 2011. This year the U.S. public safety market (including fire, police, and EMT departments) is expected to spend roughly $17.4 billion on information technology including telecom, applications, outsourcing, services/support, network hardware, computer hardware, and IT personnel. This market is expected to experience a slight decline with single-digit annual growth into 2011 and will finally pick up growth in 2011. The applications segment is predicted to be the fastest growing segment and reach $4.4 billion by 2011. There have been significant changes in SIM technology in the recent years. SIM's migration from a specialty technology to a broad enterprise resource brings opportunities for geospatial, IT infrastructure, Internet, and business analytics vendors. With the growth, the technology has become embedded in many business practices and solution. 6 Competitive Business Conditions Business Objectives and Milestones We intend to maintain and grow our presence in the information services industry by building on our reputation and specialty skills, and to achieve growth through restructuring, refinancing, strategic business alliances and other business initiatives including the sale of operating assets, the licensing of intellectual property and mergers and acquisitions opportunities. Market Competition The SIMS and technology market includes GIS and is divided into two broad categories: the government sector, which includes agencies at all levels and is presently the larger of the two categories, and the commercial sector. The markets in which we operate are highly competitive and can be significantly influenced by marketing and pricing decisions of competitors that have substantially greater resources, lower overhead or are entrenched in client organizations because of other, and sometimes, mission critical roles. Competitors include small regional firms, independent firms, large information services companies with SIM and GIS services divisions, customer in-house operations and international low-cost providers of GIS services. We believe that competition will intensify in the future. Our ability to compete successfully depends on a number of factors including: o market presence and geographic coverage; o our success at servicing a broad range of clients by applying our experience in spatially enabled data warehouses and e-government solutions to deploy innovative solutions to our customers business requirements; o reputation for reliability, service and effective customer support; o emphasis on tangible business results for our clients that include returns on their investments, service improvements, effectiveness and early success; o breadth and depth of expertise, independence, and sensitivity to the client's requirement for responsiveness and timeliness; and o ability to react to changes in the market and industry and economic trends building competencies in leading edge solutions. We believe that we compete effectively on the basis of breadth and depth of expertise, independence, and sensitivity to the client's requirement for responsiveness and timeliness. We have managed more than 1475 projects across a wide range of state and local, federal, and international customers. Approximately 59% of our revenue in fiscal year 2008 was generated through the public sector, which is comprised of state and local government and public utilities customers. Another 25% of our revenue was generated through international customers, with the majority coming from World Bank- sponsored projects in The People's Republic of China, and 16% of our revenue was generated through commercial customers. International Operations We continue to conduct business in the international arena. We have repeatedly demonstrated our ability to manage projects and deliver solutions in a wide range of international settings in Europe, the Middle East and Asia. We maintain a reputation for successful execution of World Bank-funded projects. We endeavor to limit our exposure to changes in the international economic climate by denominating our consulting and implementation contracts in United States currency, by concentrating on overseas projects for provinces and municipalities that are funded by the World Bank and by forming alliances and building relationships with third parties knowledgeable of the country specific business cultures. We maintain value added reseller agreements in targeted foreign markets for our Xmarc products. 7 In April 2004, we completed the acquisition of the intellectual property and associated business assets of Xmarc's spatial integration tools. We also acquired a wholly owned subsidiary and value added reseller, Xmarc, Ltd. of the United Kingdom, which serves a number of customers across Europe. We use the technology as an integration tool set for a wide range of e-government and e-commerce solutions that are multi-platform and need access to large and distributed data sets. The European contracts are typically denominated in British Pounds or Euros. We also make the integration tool kit available to clients and through distributors and value-added re-sellers in the U.S., Australia, and New Zealand. Proprietary Rights We rely on general copyright, trademark and trade secret laws to protect our methodologies, prior work and technology. We have registered our names and trademarks in the United States and Canada. We have developed and maintain a proprietary methodology for conducting business. This methodology and certain marketing, customer and prospect data are maintained and handled as trade secrets and are protected by policy and employment agreements. It is also our policy to require employees, consultants and, when possible, suppliers, to execute confidentiality agreements upon the commencement of their relationships with us. We have obtained exclusive rights to certain intellectual property and spatial integration software (referred to herein as the Xmarc products) previously owned by a Swiss based investment company, HPI, LLC. We diligently protect these proprietary rights in the same manner as described above. Estimate of Research and Development Costs During fiscal year 2008 we recorded minimal expenses on our own research. Research costs and those development costs incurred prior to technological feasibility and commercial viability having been established are expensed as incurred. We limit our R&D expenses to work that can be funded by maintenance revenue from the Xmarc technology, by cost sharing or available grants. Software and related development costs incurred after the establishment of technological feasibility and commercial viability are capitalized as software development costs until the product is ready for general release to customers. Amortization is provided over the estimated economic life of the product, generally not to exceed three years. Amortization commences when the product is available for general release to customers. Employees As of December 31, 2008, we had 21 full-time employees and we frequently utilize a number of associates, many of which are former PlanGraphics employees and who extend our reach and breadth of expertise. Our Executive Management Team members, who are responsible for overseeing and guiding corporate management and strategy, have an average of 21 years of industry experience and more than 15 years of tenure with PlanGraphics. We subcontract work to associates, business partners and independent consultants who generated approximately 24% of our 2008 revenue. By doing so, we have more closely aligned resources to project requirements. None of our employees are represented by a labor union. RISK FACTORS In addition to other information contained in the report, you should consider the following risk factors carefully. These risks may impair our operating results and business prospects as well as the market price of our stock. We have limited liquidity and capital resources. For the fiscal years ended September 30, 2008 and 2007, we had net losses of $468,639 and $369,549, 8 respectively. For the same periods, we had cash flows of $167,872 and $256,191 provided by operations, respectively. We had a working capital deficit of $3,469,474 and an accumulated deficit of $23,956,551 at September 30, 2008, and have had recurring net losses in all prior fiscal years since 1998. Our ability to continue operations is dependent upon our ability to generate profitable operations in the future or to obtain the necessary financing to meet our obligations and pay our liabilities from normal business operations when they come due. However, we continue to experience very constrained cash availability, resulting in delayed payments to subcontractors and vendors. The inability to timely pay subcontractors has adversely impacted our capacity to service certain major projects. We will require additional funds through equity, debt, or sale of business assets in order to fund and operate our business. Our financing arrangement with Rockland Credit Finance, LLC ("Rockland") pursuant to which Rockland purchases a portion of our accounts receivable for up to 85% of the face value of such receivables was extended to September 30, 2009. If we continue to experience net losses, we will need to obtain working capital through additional debt or equity financings or from the sale of certain assets. Any additional equity financing could dilute the equity interests of existing security holders. If adequate funds are not available or are not available on acceptable terms, our ability to operate our business and fund our operations could be materially and adversely affected. The holder of our redeemable preferred stock could require redemption of the shares and could cause a change of control. On August 21, 2006, we entered into a Preferred Stock Purchase Agreement with Nutmeg Group, LLC pursuant to which we sold and Nutmeg Group, LLC bought a total of 500 shares (the "Shares") of the Company's Series A 12% Redeemable Preferred Stock (the "Series A Preferred Stock") and a warrant to purchase shares of our common stock with an aggregate exercise price of $10.00 (the "Warrant," and together with the Shares the "Securities") for an aggregate of $500,000. The holder of Series A Preferred Stock currently has the right to require the Company to redeem the Series A Preferred Stock for $655,217 (including accrued unpaid dividends) if exercised in whole. The Warrant was exercisable for that number of shares of the Company's common stock that will constitute 80% of the common stock outstanding on a fully diluted basis, determined immediately after the exercise of the Warrant. However, the Warrant expired without action on August 20, 2007. We have experienced decreased revenues. Our total revenue, which has decreased significantly in recent years, amounts to $3,614,016 for fiscal year 2008, a decrease of 14% from the prior year. We are reporting a net loss of $468,639 for 2008 compared to $369,549 in the prior year. The decrease results from an operating loss of $388,984 compared to $257,887 for the prior year because we did not have sufficient revenue for the level of costs and expenses for 2008. Various factors may affect our operating results and cause our quarterly results to fluctuate. Our financial results may fluctuate significantly because of several factors, several of which are beyond our control. These factors include: o the impact of the national recession and the consequent reduction in revenue and discretionary budgets of our traditional client base; o continued cash flow constraints experienced by primary customers causing delays in making payments to us and in turn by us to our subcontractors and to employees; o adverse economic impacts affecting state and local government revenue collections; o increased cost and management time required to respond to increased regulatory oversight of public companies; o loss of customers, seasonal fluctuations in demand for our services; o costs associated with gaining and retaining customers and capital expenditures for upgrading our internal systems and infrastructure; 9 o timing and market acceptance of new and upgraded information services introductions, technologies, and services by us and our competitors; o downward pressure on prices due to increased competition; and o changes in our operating expenses, including compensation and subcontractor costs. Fluctuations caused by these and other factors could cause our business to suffer. The majority of our revenue comes from a limited number of customers. The Company has historically received greater than 10% of its annual revenues from one or more customers. The City of New York's Department of Environmental Protection (NYDEP) represented 26% and 34% of revenues for the years ended September 30, 2008 and 2007, respectively, while the San Francisco Department of Justice represented 16% and 11% of 2008 and 2007 revenues, respectively, and the Italian Ministry of Finance (IMOF) amounted to 12% of 2008 revenues. NYDEP accounted for 19%, the IMOF accounted for 24% of accounts receivable at September 30, 2008 while NYDEP and IMOF represented 27% and 17%, respectively, of accounts receivable at September 30, 2007 and the Panjin Municipal Planning Office 16% at the same date. . Our future success depends in significant part on the continued service of certain technical and management personnel and our ability to attract and retain key technical, sales, marketing, information systems, financial and executive personnel. A key employee of PGRA is John C. Antenucci, Chief Executive Officer. PGRA entered into an employment agreement with Mr. Antenucci on May 1, 2002 that has been extended from time to time, most recently through September 30, 2009. The agreement contains a non-compete provision that restricts Mr. Antenucci for three years following his termination date, unless otherwise approved by us, from performing work either that is in backlog for PGRA or that PGRA is pursuing. Competition for personnel is intense, and there can be no assurance that PGRA can retain its key personnel or that it can attract, assimilate or retain other highly qualified personnel in the future. Although PGRA makes non-compete and non-disclosure agreements a part of employment commitments for all professionals, the loss of key personnel, especially without advance notice, or the inability to hire or retain qualified personnel, could have a material adverse effect on our business, financial condition and results of operation. It is also possible that liquidity problems caused by constrained cash flows may adversely affect our ability to retain technical staff required to compete effectively. The United States penny stock rules may make it more difficult for investors to sell their shares. Shares of our common stock are subject to rules adopted by the Securities and Exchange Commission regulating broker-dealer practices in connection with transactions in "penny stocks." These rules require that prior to effecting any transaction in a penny stock, a broker or dealer must give the customer a risk disclosure document that describes various risks associated with an investment in penny stocks, as well as various costs and fees associated with such an investment. It is possible that some brokers may be unwilling to engage in transactions involving shares of the Company's common stock because of these added disclosure requirements, which would make it more difficult for a purchaser to sell his shares. If we fail to keep pace with technological change and evolving industry standards, we may lose customers. The GIS and IT markets are characterized by rapidly changing technology, evolving industry standards, changes in customer needs, and frequent new service and product introductions. Our future success depends, in part, on our ability to: o use leading technologies to develop our technical expertise; o enhance our existing services; and o develop new services that meet changing customer needs on a timely and cost-effective basis. In particular, we must provide customers with the appropriate products, services, and guidance to best take advantage of the rapidly evolving web-enabled services sector. Our failure to respond in a timely and effective manner to new and evolving technologies could have a negative impact on our 10 business. Our ability to compete will also depend upon the continued compatibility of our services with products offered by various vendors. Our competitors may develop services and technologies that will render our services or technology noncompetitive or obsolete. Limited cash availability may adversely affect our ability to complete work. From time to time we encounter cash shortages that delay payments to employees and subcontractors. Such delays may affect the completion of work due to inability to retain technical employees or to keep subcontractors working on projects and thus adversely affect revenue generation. Our clients' ability to terminate their contracts on short notice makes it difficult to accurately predict our revenues. Our clients retain us on a project-by-project basis. Because large engagements often involve multiple tasks, there is a risk that a client may choose to terminate or delay a project or a contract with appropriate notice and some of the contracted tasks may not be completed with concomitant reductions in anticipated revenue. Such cancellations or delays could result from factors unrelated to our work product or the progress of the project. Substantially all of our contracts with our clients may be terminated by our clients for convenience and upon short notice, generally 30 days. We cannot, however, reduce our costs as quickly or as easily as our clients can cancel their contracts with us. If a client were to terminate its contract with us, our revenues would decline and our gross margin in the quarter of cancellation would be reduced. Implementation of Section 404 of the Sarbanes-Oxley Act of 2002 on a Timely Basis. The SEC, as directed by Section 404 of the Sarbanes-Oxley Act, adopted rules generally requiring each public company to include a report of management on the company's internal controls over financial reporting in its annual report on Form 10-KSB that contains an assessment by management of the effectiveness of the company's internal controls over financial reporting. Under current rules, commencing with our annual report for the fiscal year ending September 30, 2010, our independent registered accounting firm must attest to and report on management's assessment of the effectiveness of our internal controls over financial reporting. We have developed a basic Section 404 implementation plan. We have in the past discovered, and may in the future discover, areas of our internal controls that need improvement. How companies should be implementing these new requirements including internal control reforms to comply with Section 404's requirements and how independent auditors will apply these requirements and test companies' internal controls, continues to change. We do not have a precedent available with which to measure compliance adequacy. Accordingly, there can be no positive assurance that we will receive a positive attestation from our independent auditors. We expect that we may need to hire and/or engage additional personnel and incur incremental costs in order to complete the work as required by Section 404. We have initially concluded that our internal controls are not effective; in the event that in the future we conclude that our internal controls are effective, our independent accountants may disagree with our assessment and may issue a report that is qualified. Any failure to implement required new or improved controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. ITEM 2 - DESCRIPTION OF PROPERTY Our corporate executive offices are located in Frankfort, Kentucky. PGRA does not own any real property. As of September 30, 2008, we leased commercial property in the following locations:
Location Property Leased Approximate Size Number of Employees -------- --------------- ---------------- ------------------- Frankfort, Kentucky Land and a building 10,300 square feet 16 Silver Spring, Maryland Office Space 911 square feet 5 The length of our leases varies from one to three years with renewal options. We believe that such properties are adequate to meet our current needs. If any of the existing leases terminated, we believe that there are affordable 11 alternative facilities available and such action would not have a material adverse effect on our business. (See also Subsequent Events as well as Contractual Obligations and Commercial Commitments in Management's Discussion and Analysis in Item 6, below, and Note H to the Consolidated Financial Statements.) ITEM 3 - LEGAL PROCEEDINGS We are engaged from time to time in various litigation matters in the ordinary course of business. On December 22, 2008, a subcontractor, Sanborn Map Company, Inc. ("Sanborn"), asserted in a summons filed in the District Court for Douglas County, Colorado, that it was entitled to recover an outstanding amount of $896,475 plus certain unpaid retainage of $18,501 earned for work as a subcontractor to the Company. The Company asserts that the summons was erroneously served and that the total amounts invoiced are in excess of the compensation due the Plaintiff. As a result, the Company has entered into discussions with Sanborn and its representatives to arrive at an acceptable settlement of the amounts in question. The amounts in question were previously accrued in the Company's financial records. Litigation is inherently uncertain and always difficult to predict. However, based on our understanding and evaluation of the relevant facts and circumstances, we believe that the legal matters and other litigation to which we are a party are not likely, in the aggregate, to have a material adverse effect on our results of operations, financial position or cash flows. ITEM 4 -- SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters have been submitted to a vote of security holders during the fourth fiscal quarter or subsequent to the end of the fiscal year. PART II ------- ITEM 5 -- MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Market for Common Stock Our common stock resumed trading on Nasdaq's Over-The-Counter Bulletin Board system under the symbol, PGRA , on June 16, 2008 after previously trading on the Pink Sheets LLC since February 19, 2004. The following quotations reflect inter-dealer prices without retail markup, markdown, or commission, and may not necessarily represent actual transactions. The quarterly ranges of high and low sales prices per share for the past two fiscal years have been as follows: Sales Price ----------------------- Quarters Ended High Low ---------------------- ----- ------ December 31, 2006 .0015 .0060 March 31, 2007 .0090 .0060 June 30, 2007 .0080 .0032 September 30, 2007 .0070 .0032 December 31, 2007 .0220 .0050 March 31, 2008 .0090 .0015 June 30, 2008 .0080 .0002 September 30, 2008 .0002 .0002 As of December 31, 2008, the last reported sales price of our common stock was $0.001. 12 Based on information supplied by certain record holders of our common stock, we estimate that as of December 31, 2008, there were approximately 2,980 beneficial owners of our common stock, of which approximately 2,005 are registered shareholders. We have never declared or paid any dividends on our common stock. Because we currently intend to retain any future earnings to finance operations and growth, we do not anticipate paying any cash dividends in the foreseeable future. Recent Sales of Unregistered Securities - --------------------------------------- In addition to any security sales previously reported in our quarterly reports on Form 10-QSB for the quarters ended December 31, 2007, March 31, 2008 and June 30, 2008, we have issued the following securities that were not registered under the Securities Act of 1933, as amended (the "Securities Act"). On May 1, 2002, we entered into an employment agreement with John C. Antenucci in connection with his employment as our President and Chief Executive Officer. On May 15, 2008 we issued options to purchase 972,144 shares of common stock in accordance with the terms of Mr. Antenucci's employment agreement. The options were issued under our Equity Compensation Plan and were immediately vested and are valid for five years from the date of issue. We relied on Section 4(2) of the Securities Act to exempt such options. ITEM 6 -- MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION You should read the following discussion of our financial condition and results of operations in conjunction with the consolidated financial statements and notes to those statements included elsewhere in this report. This discussion may contain forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, such as those set forth under "Risk Factors" and elsewhere in this report. Executive Summary of PlanGraphics, Inc. PlanGraphics is a full life-cycle systems integration and implementation firm, providing a broad range of services in the design and implementation of information technology related to spatial information management in the public and commercial sectors. Approximately 59% of our sales are to customers in federal, state and local governments, and utilities; 25% to international customers and the remaining 16% are to commercial enterprises. Our customers are located in the United States and in foreign markets that require locational or "spatial" information. o We had a working capital deficit of $3,469,474 and an accumulated deficit of $23,956,551 at September 30, 2008, and recurring net losses in all prior fiscal years back to 1998. The future viability of PlanGraphics is dependent upon our ability to achieve profitability in future operations. o During fiscal year 2008, the foremost challenges faced by management were coping with constrained cash flows and a substantial reduction in business opportunities within our primary markets. Management worked closely with its creditors to manage payments and from time to time has borrowed funds from officers and employees in prior years to meet temporary working capital shortages. During December 2008 the Master Factoring Agreement ("MFA," described below in "Factoring Agreement Amendment") was extended to September 30, 2009. o As a result of very constrained cash flows, we have from time to time delayed payments to subcontractors and management. As a consequence, we have experienced reduced availability of subcontractors at times during the year. o About our business: o Our consulting and systems integration and implementation capabilities include business and web-enabled solutions exploiting the advanced technologies of spatial information management systems (otherwise known as geographic information systems), data warehousing, electronic document management systems and internal and external networks. 13 o We earn our revenues on contracts that are awarded as long as two to three years after we begin the initial sales process with a customer. In many instances we first provide consulting services to determine an appropriate solution to a need and then we subsequently receive a larger contract. o Our consulting and implementation practice operates nationally and abroad. We are also pursuing opportunities related to emergency preparedness and public safety throughout the U.S. o We believe the critical factors for the future success of PlanGraphics are: o Leveraging our existing client and contract relationships in the face of declining business opportunities in the state and local government market. o Achieving positive cash flows from operations by controlling costs and developing business opportunities that are tangential to our experience set; o Securing funding arrangements to support operations; o Changing our revenue mix to increase the amount of higher margin software sales; o Increasing lagging revenue; and o Attaining net income. Constrained Cash Impacts. Over the past several years staff size has decreased and as of December 31, 2008, the Company had 21 employees. This staffing decrease limits our in-house capability to generate revenue. Accordingly, when possible, we utilize one or more PlanGraphics Associates, typically previous employees, or we locate and retain subcontractors to accomplish work that otherwise might have been done by our employees thereby reducing our gross profits. The use of subcontractors allows us, however, to more closely align specialized resources with required project levels of effort. As a result of the constrained cash flows: o We must respond to vendor or subcontractor demands for payment of delinquent accounts. In addition, we have encountered threatened or preliminary litigation on a number of unpaid liabilities. In each instance the Company has been able to arrive at settlement arrangements with the creditors. To date, all resulted in outcomes that were either neutral or favorable to PGI-MD from a financial perspective. o We may need to raise additional funds through the sale of common or preferred stock, or of certain assets. Subsequent Events Extension of officer employment agreements. On December 1, 2008, we extended the employment agreements of our two officers through September 30, 2009, with no substantive changes to the terms and condistions. Factoring Agreement Amendment. The Company's Master Factoring Agreement ("MFA") with Rockland Credit Finance, LLC ("Rockland") provided for Rockland to pay PlanGraphics for accounts receivable invoices submitted at 85% of the face value of such invoices. The MFA is secured by a lien and security interest in all of our cash, accounts, good and intangibles in favor of Rockland. Effective November 26, 2008, the MFA was extended through September 30, 2009 and the requirement for a minimum borrowing level was eliminated. Subcontractor Claim. On December 22, 2008, a subcontractor, Sanborn Map Company, Inc. ("Sanborn"), asserted in a summons filed in the District Court for Douglas County, Colorado, that it was entitled to recover an outstanding amount of $896,475 plus certain unpaid retainage of $18,501 earned for work as a subcontractor to the Company. All amounts had been previously recorded in the Company's financial records. The Company will aggressively defend its interests, asserts that the summons was erroneously served and challenges the fees sought. The Company recently waived the deficiencies of service and has entered into settlement discussions with Sanborn and its representatives. Letter of Intent. On January 9, 2009, the Company entered into a letter of intent with a merchant banking organization regarding the sale of the Company's Xmarc line of business. 14 Financial Condition The following discussion of liquidity and capital resources addresses our combined requirements and sources as of September 30, 2008 and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes beginning on page F-1 of this Form 10-KSB. Liquidity Readers should take into account that PlanGraphics has an accumulated deficit of $23,956,551 at September 30, 2008, a net working capital deficit of $3,469,474 at September 30, 2008, net losses for the years ended September 30, 2008 and 2007, and net losses back to 1998. Although we have extended our master factoring agreement with Rockland and reduced the monthly-required volume, the future viability of PlanGraphics is highly dependent upon our ability to achieve profitability in our operations in ensuing years. During fiscal year 2008, we are reporting a net loss to common stockholders of $468,639, about 26% higher than the net loss recorded for the prior year. We continued to experience very constrained cash flows. The limited cash flows have, from time to time, adversely affected our ability to timely meet vendor payment obligations. During November 2008 our Master Factoring Agreement with Rockland was extended to September 30, 2009, and previously required transaction volume was eliminated. Operations have been financed by the following sources: o Revenue generated from operations; o Extended payments schedules with our vendors, and o Short-term loans from management. We have taken actions to leverage our technical capabilities and reputation in order to improve cash flows and to reduce costs and expenses to the maximum extent possible. Cash Flow As of September 30, 2008 we had a working capital deficit of $3,469,474 as compared to a working capital deficit of $3,080,660 at September 30, 2007. The ratio of current assets to current liabilities decreased further to .18 from ..28 for the prior year. The further decrease in working capital of $388,814 resulted primarily from a net decrease of $429,667 in current assets driven primarily by a 341,472 decrease in consolidated accounts receivable due to collections of invoices. The decrease in current assets was partially offset by a small decrease of $40,855 in current liabilities. In the fiscal year ended September 30, 2008, operations provided net cash of $167,872 versus $256,191 in the previous fiscal year. The change from fiscal year 2007 resulted primarily from the increase in net loss to $468,639 in 2008 versus $369,549 for fiscal year 2007 coupled with the decrease in accounts receivable caused by receipt of payments. In the fiscal year ended September 30, 2008, investing activities used net cash of $71,433 to acquire software for future use and equipment as compared to net cash of $98,260 used in the prior year. Financing activities used $174,677 for payments on debt in 2008 as compared to $81,184 used in the prior year. Liquidation of the Xmarc note primarily accounted for the change. 15 Accounts Receivable At September 30, the components of accounts receivables were as follows: 2008 2007 ---------- ---------- Billed $ 544,720 $ 715,659 Unbilled 238,470 359,285 ---------- ---------- 783,190 1,074,944 Less allowance for doubtful accounts 49,718 -- ---------- ---------- Accounts receivable, net $ 733,472 $1,074,944 ========== ========== Accounts receivable balances at September 30, 2008 and 2007, include both billed receivables and unbilled work-in-process. The payment terms on accounts receivable generally allow for payment within 30 days. Collections generally average 45 to 90 days after invoicing, except for two major customers that generally have longer collection periods, which is consistent with industry experience for clients in the public sector. Unbilled receivables represent work-in-process that has been performed but has not yet been billed. This work will be billed in accordance with milestones and other contractual provisions. Unbilled work-in-process includes revenue earned as of the last day of the reporting period which will be billed in subsequent days. The amount of unbilled revenues will vary in any given period based upon contract activity. Receivables include retainages receivable representing amounts previously billed to customers that are withheld for a certain period of time, generally until project acceptance by the customer. At September 30, 2008 and 2007, retainage amounted to $168,434 and $144,282, respectively. Management considers all retainage amounts to be collectible. Billed receivables include $37,597 for the net amount of factored invoices due from Rockland. This amount is comprised of the amount of outstanding uncollected invoices on hand at Rockland ($244,837) less the net amount of funds employed by Rockland in servicing them ($207,240) which consists of actual cash advances, payments, and other reserves and fees related to the factoring agreement. Pursuant to the factoring agreement we have granted Rockland a lien and security interest in all of our cash, accounts, good and intangibles. The Company has historically received greater than 10% of its annual revenues from one or more customers. The City of New York's Department of Environmental Protection (NYDEP) represented 26% and 34% of revenues for the years ended September 30, 2008 and 2007, respectively, while the San Francisco Department of Justice represented 16% and 11% of 2008 and 2007 revenues, respectively, and the Italian Ministry of Finance (IMOF) amounted to 12% of 2008 revenues. NYDEP accounted for 19%, the IMOF accounted for 24% of accounts receivable at September 30, 2008 while NYDEP and IMOF represented 27% and 17%, respectively, of accounts receivable at September 30, 2007 and the Panjin Municipal Planning Office 16% at the same date. The volume of work that we perform for a specific client is likely to vary from period to period, and a significant client in one period may not use our services at the same level or at all in a subsequent period. The loss of a key customer could have an adverse impact on revenues. Deferred revenue amounts of $312,303 and $351,974 at September 30, 2008 and 2007, respectively, represent amounts billed in excess of amounts earned. Contractual Obligations and Commercial Commitments The following table highlights, as of September 30, 2008, our contractual obligations and commitments by type and period. As of September 30, 2008, our contractual obligations and commitments are as follows: 16 Total Amounts Under 2 to 3 4 to 5 Over 5 Contractual Obligations Committed 1 Year Years Years Years - ------------------------------- ---------- ---------- ---------- ---------- ---------- Operating leases $ 915,142 $ 129,308 $ 205,000 $ 205,000 $ 375,834 Remaining obligations on technology purchase 20,898 9,928 10,970 -- -- Other contractual commitments (Note 1) 779,330 430,130 349,200 -- -- ---------- ---------- ---------- ---------- ---------- Total Contractual Commitments $1,715,370 $ 569,366 $ 565,170 $ 205,000 $ 375,834 ========== ========== ========== ========== ========== - -------------- (1) Represents potential required termination payments under employment agreements if certain officers were terminated plus the amount of accrued payroll and vacation liabilities for all employees. Off-Balance Sheet Arrangements An off-balance sheet arrangement is any transaction, agreement or other contractual arrangement involving an unconsolidated entity under which a company has (1) made guarantees, (2) a retained or a contingent interest in transferred assets, (3) an obligation under derivative instruments classified as equity or (4) any obligation arising out of a material variable interest in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to the company, or that engages in leasing, hedging or research and development arrangements with the company. The Company has no off-balance sheet arrangements of the types described in the four categories above; accordingly, there would be no material current or future effect on financial condition, liquidity or results of its operations. Capital Resources For fiscal year 2009 we have operating lease commitments of $139,236. Normal operating cash flows for fiscal year 2008 were not adequate to consistently fund all required payments on a timely basis. We consider our facilities adequate to support anticipated sales and operations for the next several years. Accordingly, no major commitment for facilities expansion was entered into for the year ending September 30, 2008. In recent years we have transitioned to smaller and less expensive space when possible and increased the utilization of customer supplied space. Were any of the existing leases to be terminated, we believe that there are affordable alternate facilities available, and such action would not have an adverse impact. Since entering the information technology sector in 1998, we have funded our operations and working capital needs primarily through the public and private placement of our equity securities. We have also on occasion borrowed limited amounts from officers and other staff in order to fund temporary working capital requirements. Our factoring arrangement with Rockland provides for their purchase of up to $1.5 million of accounts receivable invoices for which they initially pay us 85% of the face value. Upon collection of the invoices Rockland remits the remaining 15% of the invoice less varying levels of discount dependent upon the age of the receivables at the time of collection. Effective November 26, 2008, the factoring agreement was extended through September 30, 2009 and the requirements for minimum levels of usage eliminated. As of September 30, 2008, we had cash and cash equivalents of $404. While we have an improved factoring arrangement for operating funds, our long-term liquidity requirements may be significant in order to support operations until attaining profitability and to implement our plans. Should additional funds be required, there can be no guarantee such funds can be secured. The Company anticipates that proceeds from the pending sale of its Xmarc line of business (see Letter of Intent discussed above) will provide funds for critical needs during FY 2009. 17 Operations Outlook Our revenue for fiscal year 2008 amounted to $3,614,016, a decrease of $605,522, or 14%, from $4,219,538 for fiscal year 2007. We expect fiscal year 2009 revenue to be comparable to fiscal year 2008 as a result of the impact of the recession on state and local government expenditures, off set by our initiatives with health services and public safety and our experience with infrastructure and asset management. We anticipate that our intensive cost reduction actions and our focus on higher profit margin projects should yield improved financial results for fiscal year 2009. We had work backlog and assignments at September 30, 2008, of approximately $2.8 million, of which approximately $2.5 million was funded. Our backlog includes projects that may take from three to 48 months to complete. More recently our backlog and assignments as of December 12, 2008, amount to approximately $1.8 million, of which approximately $1.1 million is funded. The decrease in backlog and assignments over the past two years was caused by the natural drawdown of multi-year contracts, suspension and cancellation of assignments as an outcome of declining client budgets and an overall reduction of project opportunities in the current recessionary business environment. We report backlog based on executed contracts and assignments based on contract awards where documentation is pending and task orders against existing indefinite quantity contract vehicles. Some of our contracts are funded incrementally through different funding sources and cycles; we report the funded portion of the total backlog and assignments. A typical contract, standard for the industry, includes terms that permit termination for convenience by either party with 30 days prior notice. Most of our orders are from existing or previous customers with whom we have a good relationship We also believe the potential gross profit margins in information technology are much higher than we presently experience. We are working vigorously to grow the spatial data management and integration solutions of our GIS business base. Currently, we plan to continue building and leveraging strategic partnerships with clients and other firms. To that end, we have made substantial progress in positioning PlanGraphics as a provider of Internet-accessible data repositories and warehouses that leverage spatial data and e-government solutions. We have recently extended our role for the third time with the San Francisco Department of Telecommunications and Information Systems project originally awarded to us during fiscal year 2006 to build out the "hub" of an inter-agency repository for the City and County's Criminal Justice System. We also continue to work closely on business development efforts with the Altarum Institute that provides health planning services to the DOD and VA following on our successful modernization of a military health systems forecasting toolset and database with Altarum Institute. During 2002 and 2003, we acquired in perpetuity the exclusive rights to Xmarc trademarks, intellectual property and technology and all subsequent product enhancements. The technology provides wireless and Internet-enabled software solutions that aid in the access of location-based information from data warehouses and repositories. During fiscal year 2008 we recorded approximately $736,235 in Xmarc related revenues from all sources. As noted above, we have a financing arrangement under which up to $1.5 million of accounts receivable invoices are purchased by Rockland who then initially pays us 85% of the face value pending collection when the remainder less a varying discount is remitted to us. Accordingly, our management team believes that while our cash flows are very constrained, we have the capacity to address the most immediate needs for cash and liquidity. We have also aggressively controlled costs and expenses. Funds from the factoring facility available to PlanGraphics coupled with very close management of our required payments allowed us to meet the cash needs of the company through December 31, 2008. 18 Results of Operations Years Ended September 30 ------------------------------------------ Selected financial statement data 2008 2007 --------------------------------- ----------- ----------- Income Statement Information: Revenues $ 3,614,016 $ 4,219,538 Cost and expenses 4,003,000 4,477,425 Operating loss (388,984) (257,887) Net loss (468,639) (369,549) Balance Sheet Information: Total assets 973,209 1,509,076 Total current liabilities 4,223,755 4,264,608 Working capital (deficit) (3,469,474) (3,080,660) Shareholders' deficit (3,250,546) (2,790,073) Results of operations for the year ended September 30, 2008 compared to September 30, 2007 Revenues Our revenues decreased by $605,522, or 14%, from $4,219,538 for the fiscal year ended September 30, 2007 to $3,614,016 for the fiscal year ended September 30, 2008, mostly as a result of a decrease of $691,998 or about 16% in sales to local governments and commercial customers while Xmarc revenues increased by $86,476, or 13%. Lack of working capital when needed adversely impacted our ability to keep our technical staff and subcontractors continuously on certain projects generating revenue which inhibited our ability to further generate revenue along with reduced available opportunity in the public government sector. The sources of our revenues were: Fiscal Year 2008 Fiscal Year 2007 ---------------- ---------------- Local government $1,874,136 $2,712,439 State and federal government 224,598 54,372 Commercial customers 578,506 527,032 International 936,776 925,695 Total $3,614,016 $4,219,538 19 Total Costs and Expenses Total costs and expenses for the fiscal year ended September 30, 2008 amounted to $4,003,000, a decrease of $474,425, or 11%, compared to $4,477,425 for the fiscal year ended September 30, 2007. Changes in costs and expenses from the prior year are: o Direct contract costs decreased $392,180, or 16%, as compared to the 14% decrease in revenue from the prior year. Most of the decrease came from decreased direct salaries and decreased subcontractor expenses. o Salaries and employee benefits decreased by $151,898, or 12%, primarily as a result of a decrease in indirect labor compensation and related benefits. o General and administrative expenses decreased $23,646 during 2008 or 4%, from the prior fiscal year as a result of: o A decrease of $11,597 in overhead expenses primarily from a $55,008 in reversal of settlement expenses in the prior year and a change in foreign currency gains of $19,370; both of which were offset by reductions of $79,443 in professional fees and a decrease of $10,010 in property insurance; o A decrease of $16,334 in governance expenses caused mostly by reduced directors and officers liability insurance premium , and; o A decrease of $4,285 in public company costs resulting primarily from reduced costs for SEC filings as a result of not having added costs for prior year filings. o Marketing and selling costs decreased further by $10,102, or 37%, primarily from constrained cashflows limiting budgets which reduced expenditures in: o Conference expenses $4,387; o Reduced communication, transportation, travel and lodging costs driving a $5,762 decrease in marketing costs o Other operating expenses increased by $103,401, or 85% primarily because of the prior year reversal of an uncollectible debt expense of $99,120 plus the accrual of $49,718, both of which were offset by a decrease in depreciation and amortization expense of $45,436. Net Income Our operating loss for the fiscal year ended September 30, 2008 was $388,984 compared to an operating loss of $257,887 for fiscal year 2007. This decrease of $131,097 was primarily a result of the decrease of $605,522 in current year revenue which was not completely offset by the $474,425 decreases in total costs and expenses. Interest expense decreased by $39,445 to $142,908 in fiscal year 2008 as compared to a total of $182,353 during fiscal year 2007; this represents a decrease of 21% caused by a decrease in the dollar volume of invoices factored. Other income decreased $7,438 or 11% from the prior year total primarily as a result of a decrease in income from forgiveness of debt. 20 Our net loss for the fiscal year ended September 30, 2008 was $468,639 compared to a net loss of $369,549 for fiscal year 2007, a change of $99,090, or 28%. The increase in net loss was primarily the decrease in revenue and costs and expenses which did not decrease sufficiently. Master Factoring Agreement Our master factoring agreement ("MFA") with Rockland Credit Finance provides for the sale of invoices up to $1.5 million from accounts receivable. Initially Rockland pays us up to 85% of invoice face value and the remaining 15% upon collection, less fees and interest. The agreement is secured by a lien and security agreement in all of our cash, accounts, goods and intangibles in favor of Rockland. The MFA expires on September 30, 2009. Market Risk Market risk is the potential change in a financial instrument's value caused by fluctuations in interest or currency exchange rates, or in equity and commodity prices. Our activities expose us to certain risks that management evaluates carefully to minimize earnings volatility. At September 30, 2008, and during the prior fiscal year, we were not a party to any derivative arrangement. We do not engage in trading, hedging, market-making or other speculative activities in the derivatives markets. Most of our international sales are denominated in U.S. dollars with the exception of the payments made to Xmarc Limited whose clients pay in British Pounds Sterling and Euros. Receipts in currencies other than United States dollars are converted into United States dollars at the exchange rate in effect on the date of the transaction. Management views the exchange rate fluctuations occurring in the normal course of business as low risk and they are not expected to have a material effect on the financial results of the Company. Foreign Currency Exchange Rate Risk. We conduct business in a number of foreign countries and, therefore, face exposure to slight but sometimes adverse movements in foreign currency exchange rates. International revenue of $936,776 was about 26% of our total revenue in 2008; approximately $904,262, or 25% of our total revenue, was denominated in a currency other than U.S dollars. Accordingly, a 10% change in exchange rates could increase or decrease our revenue by $90,426. Since we do not use derivative instruments to manage foreign currency exchange rate risks, the consolidated results of operations in U.S. dollars may be subject to some amount of fluctuation as foreign exchange rates change. In addition, our foreign currency exchange rate exposures may change over time as business practices evolve and could have a material impact on our future financial results. Our primary foreign currency exposure is related to non-U.S. dollar denominated sales, cost of sales and operating expenses related to our international operations. This means we are subject to changes in the consolidated results of operations expressed in U.S. dollars. Other international business, consisting primarily of consulting and systems integration services provided to international customers in Asia, is predominantly denominated in U.S. dollars, which reduces our exposure to fluctuations in foreign currency exchange rates. There have been and there may continue to be period-to-period fluctuations in the relative portions of international revenue that are denominated in foreign currencies. The net amount of foreign currency gains and (losses) was $8,675 for fiscal year 2008 and $10,007 for fiscal year 2007. In view of the foregoing, we believe our exposure to market risk is limited. Critical Accounting Policies General. Discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent liabilities. On a regular basis, we evaluate estimates, including those related 21 to bad debts, intangible assets, restructuring, and litigation. Estimates are based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies require significant judgments and estimates used in the preparation of our consolidated financial statements. Revenue Recognition. Our revenue recognition policy is significant because our revenues are a key component of our results of operations. We recognize revenue in accordance with SEC Staff Accounting Bulletin 104 "Revenue Recognition" ("SAB 104"). SAB 104 provides guidance on the recognition, presentation, and disclosure of revenue in financial statements and updates Staff Accounting Bulletin Topic 13 to be consistent with Emerging Issues Task Force Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" ("EITF 00-21"). We recognize revenues when (1) persuasive evidence of an arrangement exists, (2) the services have been provided to the client, (3) the sales price is fixed or determinable, and (4) collectibility is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the fee charged for services rendered and products delivered and the collectibility of those fees. Our operations require us to make significant assumptions concerning cost estimates for labor and expense on contracts in process. Due to the uncertainties inherent in the estimating process for costs to complete contracts in process under the percentage of completion method, it is possible that completion costs for some contracts may need to be revised in future periods. Should changes in conditions or estimates cause management to determine a need for revisions to these balances in transactions or periods, revenue recognized for any reporting period could be adversely affected. Allowance for Doubtful Accounts. We make estimates of the collectibility of our accounts receivable. We specifically analyze accounts receivable and historical bad debts, client credit-worthiness, current economic trends, and changes in our client payment terms and collection trends when evaluating the adequacy of our allowance for doubtful accounts. Any change in the assumptions used in analyzing a specific account receivable may result in additional allowance for doubtful accounts being recognized in the period in which the change occurs. Contingencies. From time to time we are engaged in legal actions arising in and out of the ordinary course of business. We, with assistance from legal counsel, are required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses. A determination of the amount of liability required, if any, for these contingencies is made after careful analysis of each individual matter. The required reserves, if any, may change in the future due to new developments in each matter or changes in approach, such as a change in settlement strategy for a particular matter. In the ordinary course of Business PlanGraphics may become involved in matters of litigation associated with protecting its Intellectual Property, collection of fees and the resolution of content invoices from vendors and subcontractors. See also Item 3, Legal Proceedings, above, regarding a subcontractor, Sanborn. Goodwill and Intangible Assets. Goodwill represents the excess of the purchase price over the fair value of the assets acquired. The Company accounts for goodwill in accordance with Statement of Financial Accounting Standard (SFAS) No. 142, "Goodwill and Other Intangible Assets". SFAS No. 142 requires the use of a non-amortization approach to account for purchased goodwill and certain intangible assets. Under the non-amortization approach, goodwill and certain intangible assets are not amortized into results of operations, but instead are reviewed for impairment at least annually and written down and charged to results of operations in the periods in which the recorded value is determined to be greater than the fair value. The Company did not record any impairment of assets on its records for fiscal year 2008. Impairment of Assets. We review long-lived assets and certain identifiable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In performing the review for recoverability, we estimate the future cash flows expected to result from the use of the asset and its eventual disposition. If the sum of the expected future cash flows (undiscounted and without interest charges) is less than the carrying amount of the asset, we recognize an impairment loss. Otherwise, an impairment loss is not recognized. 22 Measurement of an impairment loss for long-lived assets and identifiable intangibles that we expect to hold and use are based on the fair value of the asset. The Company has reviewed these assets recorded at September 30, 2008 and found no impairment. Purchased and Internally Developed Software Costs for Future Project Use. Purchased software is recorded at the purchase price. Software products that are internally developed are capitalized when a product's technological feasibility has been established. Amortization begins when a product is available for general release to customers. The costs for both purchased and developed software are then amortized over a future period. The amortization is computed on a straight-line basis over the estimated economic life of the product, which is generally three years, or on a basis using the ratio of current revenue to the total of current and anticipated future revenue, whichever is greater. All other research and development expenditures are charged to research and development expense in the period incurred. Management routinely assesses the utility of its capitalized software for future usability in customer projects. No write-downs were recorded in fiscal year 2008. Deferred Tax Valuation Allowance -- Fiscal Year 2008 We have net operating loss carry-forwards of approximately $19.9 million as of September 30, 2008 with expirations through 2028 (See Note G to the Financial Statements). We have established a 100% valuation allowance on the net deferred tax asset arising from the loss carry forwards in excess of the deferred tax liability. The valuation allowance has been recorded as we have not been able to determine that it is more likely than not that the deferred tax assets will be realized. The utilization of the loss carry forwards may be limited under Internal Revenue Service Code Section 382 regulations related to transfers of ownership. Effect of Recent Accounting Pronouncements The pronouncements that may affect us in the ensuing fiscal year are: FSP 142-3. In April 2008, the Financial Accounting Standards Board ("ASB") issued Financial Statement of Position ("FSP") 142-3, "Determination of the Useful Life of Intangible Assets", (FSP 142-3). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, "Goodwill and Other Intangible Assets". FSP 142-3 is effective for fiscal years beginning after December 15, 2008. The Company is currently assessing the impact of FSP 142-3 on its consolidated financial position and results of operations. SFAS 162. In May 2008, the FASB issued Statement of Financial Accounting Standard ("FAS") No. 162, "The Hierarchy of Generally Accepted Accounting Principles ("GAAP")." SFAS No. 162 identifies the sources of accounting principles (see below) and provides entities with a framework for selecting the principles used in preparation of financial statements that are presented in conformity with GAAP. The current GAAP hierarchy has been criticized because it is directed to the auditor rather than the entity, it is complex, and it ranks FASB Statements of Financial Accounting Concepts, which are subject to the same level of due process as FASB Statements of Financial Accounting Standards, below industry practices that are widely recognized as generally accepted but that are not subject to due process. The Board believes the GAAP hierarchy should be directed to entities because it is the entity (not its auditors) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. The adoption of FASB 162 is not expected to have a material impact on the Company's consolidated financial position and results of operations. The sources of accounting principles that are generally accepted are categorized in descending order as follows: a) FASB Statements of Financial Accounting Standards and Interpretations, FASB Statement 133 Implementation Issues, FASB Staff Positions, and American Institute of Certified Public Accountants (AICPA) Accounting Research Bulletins and Accounting Principles Board Opinions that are not superseded by actions of the FASB. b) FASB Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and Accounting Guides and Statements of Position. 23 c) AICPA Accounting Standards Executive Committee Practice Bulletins that have been cleared by the FASB, consensus positions of the FASB Emerging Issues Task Force (EITF), and the Topics discussed in Appendix D of EITF Abstracts (EITF D-Topics). d) Implementation guides (Q&As) published by the FASB staff, AICPA Accounting Interpretations, AICPA Industry Audit and Accounting Guides and Statements of Position not cleared by the FASB, and practices that are widely recognized and prevalent either generally or in the industry. SFAS 163. In May 2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60." Diversity exists in practice in accounting for financial guarantee insurance contracts by insurance enterprises under FASB Statement No. 60, Accounting and Reporting by Insurance Enterprises. This results in inconsistencies in the recognition and measurement of claim liabilities. This Statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. Management has concluded that, because the Company is not involved in the insurance industry, the adoption of FASB 163 is not expected to have a material impact on the Company's consolidated financial position and results of operations. FSP 14-1. In May 2008, the FASB issued FASB Staff Position (FSP) APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)." APB 14-1 requires the issuer to separately account for the liability and equity components of convertible debt instruments in a manner that reflects the issuer's nonconvertible debt borrowing rate. The guidance will result in companies recognizing higher interest expense in the statement of operations due to amortization of the discount that results from separating the liability and equity components. APB 14-1 will be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting APB 14-1 on its consolidated financial statements. EITF No. 03-6-1. In June 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position ("FSP") No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities ("EITF 03-6-1"). EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation under the two-class method of calculating earnings per share. EITF 03-6-1, which is applied retrospectively, will become effective for the Company beginning January 1, 2009. The Company is currently evaluating the potential impact of EITF 03-6-1 on its consolidated financial statements. Emergency Economic Stabilization Act. The Emergency Economic Stabilization Act of 2008 (the Act) was enacted on October 3, 2008, and requires the SEC to conduct a study on mark-to-market accounting as provided in SFAS No. 157 applicable to financial institutions, including depository institutions. The study will focus on a number of areas, including the advisability and feasibility of modifications to the standard, and alternative accounting standards to those provided in SFAS No. 157. The Company does not presently have transactions or account balances subject to SFAS 157, but will continue to monitor and evaluate the Act for any potential impacts. We have reviewed all significant newly issued accounting pronouncements and concluded that, other than those disclosed herein, no material impact is anticipated on the financial statements as a result of announced accounting changes. 24 ITEM 7 -- FINANCIAL STATEMENTS The financial statements required by this item begin on page F-1 of this Form 10-KSB. An index to the financial statements is contained in that separate section. ITEM 8 -- CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. Item 8A -- Controls and Procedures Evaluation of Disclosure Controls and Procedures We maintain "disclosure controls and procedures" as such term is defined in Rule 13a-15(e) of the Securities Exchange Act of 1934. In designing and evaluating our disclosure controls and procedures, our management recognized that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures is based partially upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Our disclosure controls and procedures are intended: o to give reasonable assurance that the information required to be disclosed by us in reports that we file under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and o to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is accumulated and communicated to our management, including our Chief Executive Officer ("CEO") and Senior Vice President - Finance, who is also our principal accounting officer ("PAO"), to allow timely decisions regarding required disclosure. The CEO and the PAO of the Company are responsible for evaluating the effectiveness of the Company's disclosure controls and procedures and have concluded, based on their evaluation, that such controls and procedures were effective as at September 30, 2008 to ensure that information required to be disclosed in reports filed or submitted under United States securities legislation is recorded, processed, summarized and reported within the same period specified in those rules and regulations. Management's Report on Internal Controls Over Financial Reporting The CEO and the PAO of the Company are responsible for designing and maintaining internal controls over financial reporting, or causing them to be designed under their supervision, to provide reasonable assurance for the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal controls over financial reporting include policies and procedures that: o Pertain to the maintenance of records that in reasonable detail will accurately and fairly reflect the transactions and dispositions of our assets, o Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are made only in accordance with the authorization of management, and 25 o Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets that could have a material effect on our financial statements. Using the framework provided by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO"), on behalf of the Company its CEO and PAO conducted an evaluation of the effectiveness of the internal controls over financial reporting as of September 30, 2008 and concluded that there are deficiencies and material weaknesses in internal controls over financial reporting, which are as follows: o The Company does not have an audit committee, and o Due to the limited number of staff resources, the Company believes there are instances where a lack of segregation of duties exists which would be required to provide effective controls; o Due to the limited number of staff resources, the Company may not have the necessary in-house knowledge to address complex accounting and tax issues that may arise; and o The limited staff in accounting and finance does not allow for an adequate review rocess of adjusting journal entries and financial results. As a result of these findings, the Company's internal controls over financial reporting are deemed not effective. PCAOB Auditing Standard No. 5 defines: o A material weakness as a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of annual or interim financial statements will not be prevented or detected on a timely basis. o A significant deficiency as a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe than a material weakness, yet important enough to merit attention by those responsible for oversight of the company's financial reporting. The findings noted above and their related risks are not uncommon in a company the size of PlanGraphics, Inc. because of limitations in size and number of staff. The Company believes it has taken initial steps to mitigate these risks by identifying certain conditions which require correction and involving the Board of Directors in reviews and consultations where necessary. However, these weaknesses in internal controls over financial reporting could result in a more than remote likelihood that a material misstatement would not be prevented or detected. The Company believes that it must take additional steps to further mitigate these risks by consulting outside advisors on a more regular and timely basis. This annual report does not include an attestation report of the Company's independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the Company's independent registered public accounting firm pursuant to temporary rules of the SEC that permit the Company to provide only management's report in this annual report. Our independent auditors will be required to attest to, and report on, management's assessment of the effectiveness of internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of 2002 (SOX) in their audit of our annual report for the year ending September 30, 2010. Changes in Internal Control Over Financial Reporting During the period covered by this annual report, there have been no changes in the Company's internal controls over financial reporting that occurred that have materially affected, or are reasonably likely to materially affect, the Company's internal controls over financial reporting. Item 8B - Other Information None. 26 PART III -------- ITEM 9 -- DIRECTORS, EXECUTIVE OFFICERS PROMOTERS AND CONTROL PERSONS; COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT Our directors and executive officers as of December 31, 2008, were: Name Age Position - --------------------- --- ---------------------------------------------------------------------- John C. Antenucci 62 Director, President and Chief Executive Officer of PGRA; President and Chief Executive Officer of PGI-MD Frederick G. Beisser 66 Senior Vice President - Finance, Secretary and Treasurer All directors hold office until the next annual meeting of shareholders and serve until their successors are duly elected and qualified, or until their earlier death, resignation or removal. John C. Antenucci is President and Chief Executive Officer of PGRA and has been a director since November 3, 1998. He is the founder and has been the President and Chief Executive Officer of PGI-MD since 1979. He is a former president of AM/FM International (now GITA), a professional association for utility industry users of geographic information systems. He has served as a member of the National Academy of Sciences Advisory Committee on the Future of U.S. Geological Survey and in a similar capacity on the Academy's Advisory Committee for Mapping Sciences. He has recently co-authored the second addition of the Manual of Geospatial Science and Technology, a textbook on geographic information systems, global positioning systems and remote sensing, and was editor and co-author of an earlier textbook on geographic information systems. Mr. Antenucci holds an M.S. Civil Engineering/Water Resources from Catholic University of America in Washington, D.C. and a Bachelor of Civil Engineering from the same institution. Frederick G. Beisser joined PGRA's predecessor, DCX Inc, as Chief Financial Officer in July 1990 and was promoted to Vice President - Finance and Administration, on March 28, 1998 and to Senior Vice President - Finance effective January 1, 2002. He was elected to the Board of Directors in March 1991, at which time he also became Treasurer and was subsequently appointed Secretary on October 1, 1991. Mr. Beisser's directorship ended on April 30, 2002. Mr. Beisser is a Colorado Certified Public Accountant. Prior to joining PGRA, he held financial management and controller positions with the U.S. Air Force in the United States and abroad. Retired with the rank of Major in 1989, he holds a Ph.D. from American International University in Canoga Park, California, an M.B.A. from Golden Gate University in San Francisco and a B.S. in Business Administration from the University of Southern Colorado in Pueblo, Colorado. In addition, Mr. Beisser has a diploma from the Air War College. He is also a member of the Board of Directors of Environmental Energy Services, Inc. of Boise, Idaho. Other Associations During the past five years, one principal of PGRA has served as a principal of the following reporting issuer during the periods and in the capacities noted below: Principal Reporting Issuer Capacity Period --------- ---------------- -------- ------ Frederick G. Beisser Environmental Energy Services, Inc. Director March 1999 to present Audit Committee/Audit Committee Financial Expert We are not required to designate an audit committee financial expert and the board of directors has not done so. Section 16(a) Beneficial Ownership Reporting Compliance Based solely upon a review of Forms 3, 4 and 5 filed with the SEC, and other information known to the Company, during and with respect to the fiscal year ended September 30, 2007, we believe that all directors, officers and beneficial owners of more than 10 percent of our registered shares timely filed all reports required by Section 16(a) of the Exchange Act. 27 Code of Ethics Our Board of Directors approved a Code of Ethics for senior financial officers on October 7, 2002. We filed it with our September 30, 2002 report on Form 10-KSB as Exhibit 99.3 and the signed code is available on our website at www.PlanGraphics.com. The Board of Directors has not yet extended the code to apply to other officers of the Company. ITEM 10 -- EXECUTIVE COMPENSATION EXECUTIVE COMPENSATION Compensation Discussion and Analysis Overview In this section, we discuss the principles underlying our executive compensation policies and decisions and the most important factors relevant to an analysis of these policies and decisions. We provide qualitative information regarding the manner and context in which compensation is awarded to, and earned by, our executive officers to give perspective to the data we present in the compensation tables, as well as the narratives that follow the tables. The following Compensation Discussion and Analysis describes the material elements of compensation for the named executive officers identified in the Summary Compensation Table below. Our chief executive officer, John C Antenucci, reviewed the base salary, annual bonus and long-term compensation levels for the other named executive officers. At the beginning of fiscal year 2007 the Compensation Committee was comprised of our then sole outside director, Raymund O'Mara. He retired from the Board of Directors effective March 22, 2007. Compensation Philosophy We reward our named executive officers (identified in our 2008 Summary Compensation Table below) for their efforts in helping us achieve improved results and for helping us to take important steps to meet our long-term strategic goals. Our executive compensation mix includes a base salary, annual incentive bonus awards and long-term compensation in the form of stock options. To further this philosophy, we have designed our executive compensation program to achieve the following objectives: o Attract, motivate and retain key executive talent; o Provide appropriate incentives that motivate our named executive officers to help us achieve improved financial and operational performance; and o Continue to align our named executive officers' compensation interests with our goal of improving long-term shareholder value. During the past several years we have been engaged in a cost-cutting program to significantly reduce expenses and move toward profitability. Because of this, coupled with operational and management changes, as well as the cessation of the Compensation Committee, the Company does not have a uniform compensation plan for its executive officers. 28 During fiscal year 2007 the Compensation Committee with input from the chief executive officer developed the 2007 compensation package for our chief executive officer considering competitive market data on salaries, target annual bonus incentives and long-term incentives, as well as the executive responsibility, experience and overall performance. That compensation package has been continued through 2009 as a result of the two extensions to the previously negotiated employment agreement. In developing the package, the Compensation Committee did not give any specific weighting to any of these factors, and did not adopt any formal plan or policies for allocating compensation between long-term and current compensation, between cash and non-cash compensation, or among other forms of different compensation. This is due in part to the changes in our management team, cost cutting noted above and the need to tailor each executive's compensation package to attract and retain that executive. Our Compensation Committee did not identify a set of peer companies against which to benchmark executive compensation. Elements of PlanGraphics' Compensation Program The compensation program for PlanGraphics' executive officers is composed of three principal components: base salary, annual incentive compensation and long-term incentive compensation in the form of equity-based awards. Base Salary. Salaries are used to provide a fixed amount of compensation for the executive's regular work. Paid in cash, they provide a fixed element of pay for our executives and are established based on the scope of their responsibilities, taking into account compensation paid by peer companies in our industry for similar positions and taking into account individual job responsibility and contribution. Base salaries are reviewed annually, and adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance, experience and other criteria. During late fiscal year 2006 and early 2007 the Compensation Committee reviewed the recommendations of the chief executive officer for base salaries for named executive officers for fiscal year 2007. The chief executive officer proposed base salary amounts for officers of PGI-MD based on his evaluation of individual performance, expected future contributions and prevailing compensation in the spatial information management industry for individuals with comparable responsibilities and experience. Annual Incentive Compensation. While we do not have a formal bonus plan per se, annual and incentive bonuses, if any, for our Named Executive Officers are granted at the discretion of the Compensation Committee and delineated in the individual employment agreements. During fiscal year 2007 the Compensation Committee, prior to its cessation, arrived at and included in the employment agreement for the chief executive officer certain incentives that could be achieved for additional income as well as a requirement for the chief executive officer to place 15 percent of his base salary at risk of forfeiture if specific goals were not achieved. The incentive bonuses are based on the operating subsidiary, PlanGraphics Maryland, attaining certain levels of EBITDA (earnings before interest, taxes, depreciation and amortization) levels; EBITDA was selected because it was deemed to best reflect controllable operations. Long Term Incentive Compensation. Equity-based compensation and ownership ensures that the Company's executive officers have a continuing stake in the long term success of the Company. We believe the use of equity-based awards creates an ownership culture that aligns the interests of our executives with those of our stockholders. Historically our long-term incentives have been in the form of stock option awards that only produce value for our executives if the price of our stock appreciates. We believe this aligns the interests of our executives with those of our stockholders. Because we have experienced volatility in our business, the Company believes that stock option grants provide a significant incentive to our employees and executive officers. 29 Perquisites. We provide, on a conservative basis, perquisites typically provided at companies against which we compete for executive talent, including reimbursement of automobile and other expenses, and such other perquisites as may be provided for in an executive's individual employment agreement. Other Benefits. All employees may participate in our 401(k) Plan, which is a defined contribution plan designed to encourage and assist employees to plan for retirement. Eligible employees, including our named executive officers, may make pre-tax deferral contributions to the 401(k) Plan of up to a specified percentage of their compensation, subject to certain limits under the Internal Revenue Service Code limits. We provide this 401(k) Plan to help our employees save a portion of their cash compensation for retirement in a tax efficient manner. PlanGraphics presently makes no matching contributions and does not anticipate doing so pending a return to profitability. All fulltime employees, including our named executive officers, may participate in our health and welfare benefit programs; including medical, dental and vision care coverage, disability insurance and life insurance. Severance Compensation and Change in Control Benefits. We have employment agreements with each of our named executive officers pursuant to which the officer will receive benefits and payments if his employment terminates under certain conditions. These agreements are described in "Employment and Change in Control Agreements," below. Accounting and Tax Considerations Because of the limited levels of our compensation, we believe our compensation program complies with Internal Revenue Code Sections 162(m) and 409A. Under Section 162(m) of the Internal Revenue Code, a limitation is placed on tax deductions of any publicly-held corporation for individual compensation to certain executives of such corporation exceeding $1,000,000 in any taxable year, unless the compensation is performance-based. If an executive officer is entitled to nonqualified deferred compensation benefits that are subject to Section 409A, and such benefits do not comply with Section 409A, then the benefits are taxable in the first year they are not subject to a substantial risk of forfeiture. In such case, the executive officer is subject to regular federal income tax, interest and an additional federal income tax of 20% of the benefit included in income. PlanGraphics has no individuals with non-performance based compensation paid in excess of the Internal Revenue Code Section 162(m) tax deduction limit. 2007 EXECUTIVE OFFICER COMPENSATION Summary Compensation Table The following table sets forth summary information concerning compensation awarded to, earned by, or accrued for services rendered to the Company in all capacities by our principal executive officer, our former chief operating officer, and two other most highly compensated employees of our operating subsidiary who were employed at September 30, 2008 (collectively, the "Named Executive Officers"): 30 Option Name and principal Salary Bonus awards Total position Year ($) ($) ($) Note 1 Note 2 Note 3 ------ ------ ------ John C Antenucci President & Chief Executive Officer 2008 157,000 - - 157,000 Michael Kevany, Senior Vice President, PGI-MD 2008 103,000 - - 103,000 John Chen Vice President 2008 110,000 - - 110,000 International, PGI-MD (Note: Columns with no data have been removed from the standard table.) (1) These amounts in the salary column reflect the basic compensation earned during fiscal year 2008 by the named executive officers. (2) There was no incentive bonus award earned by any named officer during fiscal year 2008. (3) The amount of nil in the option awards column reflects the fair value dollar amount recognized for financial statement reporting purposes in fiscal year 2008 for option awards granted to the chief executive officer pursuant to his employment agreement. He received a stock option grant to acquire 972,144 of common stock at $0.0036 per share. The amount of nil shown in the table is valued in accordance with Statement of Financial Accounting Standards No. 123(R). (4) There is no amount reported in the "All Other Compensation" column because the total amount of perquisites and benefits, other than those generally available to all employees, provided to the executives are less than the threshold required for disclosure. The following table sets forth certain information with respect to outstanding equity awards at September 30, 2008 for our named executive officers. 31 Outstanding Equity Awards at Fiscal Year End September 30, 2008 Option awards Equity incentive Number of Number of plan Name securities securities awards: Number of Option underlying underlying securities exercise Option unexercised unexercised underlying price expiration date options options unexercised unearned ($) exercisable unexercisable options - ------------------------------------------------------------------------------------------------------------------------------------ Note 1 John C Antenucci 972,144 - - 0.0400 Apr 30, 2009 972,144 - - 0.0150 Apr 30, 2010 972,144 - - 0.0120 Apr 30, 2011 1,750,000 - - 0.0140 May 16, 2012 Michael Kevany - - - - - John Chen - - - - - (1) As has been customary for the Company's stock option grants, all of Mr. Antenucci's stock options were immediately fully vested at the date of grant and expire five years from the date of grant. 2008 Option Exercises and Stock Vested During fiscal year 2008 there were options exercised to acquire 1,944,288 shares of our common stock; the total intrinsic value of options exercised during fiscal year 2008 is $5,444. Employment and Change in Control Agreements Employment Agreements Mr. Antenucci. During the period from October 1, 2006 through September 30, 2008, our chief executive officer, John C. Antenucci, was compensated under his prior employment agreement from 2002, as amended from time to time. His 2009 employment agreement, described below, expires on September 30, 2009. Effective October 1, 2006, we amended Mr. Antenucci's 2002 employment agreement for fiscal year 2007. The amendment froze separation entitlements as of September 30, 2006, extended employment through December 31, 2007, placed one month of the officer's fiscal year 2008 salary plus 15% of monthly salaries into an at risk deferral account and replaced the previously existing incentive bonus provisions to read as outlined below. The Company shall release the Executive's Salary Deferral based on the earnings of PlanGraphics Inc. of Maryland (prorated on a calendar quarter by quarter basis) as follows: 32 o An amount equal to 18% of gross salary if EBITDA is greater than $50,000 for any quarter and EBITDA exceeds $50K for the fiscal year. o An amount equal to 23% of gross salary if EBITDA is greater than $75,000 for any quarter and EBITDA exceeds $75K for the fiscal year. o An amount equal to 28% of gross salary if EBITDA is greater than $100,000 for any quarter and EBITDA exceeds $125K for the fiscal year. o An amount equal to 28% of gross salary if EBITDA is greater than $100,000 for any quarter and EBITDA exceeds $125K for the fiscal year. o An amount equal to 3% of EBITDA greater than $100,000 for any quarter if EBITDA exceeds $400,000 for the fiscal year. o To the extent that the Incentive Bonus exceeds the Executive Salary Deferral, the amounts paid shall be considered "Additional Compensation" subject to applicable withholdings for taxes. The Salary Deferral and Additional Compensation shall be released within 15 days of the completion of the 4th quarter internal financial management reports, but no later than February 28, 2009. As compensation for his agreement to the revised provisions of the Employment Agreement, Mr. Antenucci received a stock option grant to acquire 1,750,000 shares of our common stock priced at the market closing price of $0.014 on October 31, 2006, the date the Compensation Committee entered into compensation negotiations for fiscal year 2007. The options vested immediately upon grant and are exercisable for a period of five years from date of issuance. Mr. Antenucci is also entitled to life insurance in the amount of $1,000,000, accidental death and dismemberment insurance in the amount of $250,000, an automobile allowance of $450 per month and reimbursement of expenses and fees incidental to his position. Termination provisions provide that the employment agreement may be terminated by written notice of termination by either party at any time after which the employment agreement ends 90 days thereafter; or upon expiration without renewal or extension, or upon the executive's death. In the event of termination the agreement provides that: o If termination by the Company for its convenience the executive shall receive one month of base compensation (base salary plus monthly employee benefits) for each year of service as an employee or officer of the Company. o If constructive termination and if the executive waives his right to consulting employment, the executive shall receive one month of base compensation for each year of service as an employee or officer of the Company. o If termination due to other resignation by executive and if he waives his right to consulting employment, the executive shall receive two weeks of base compensation for each year of service as an employee or officer of the Company. o If termination upon expiration of the agreement without renewal or extension, the executive shall receive one month of base compensation for each year of service as an employee or officer of the Company. o If termination by the company for cause, the executive shall receive six months of base compensation. o If termination due to the death of the executive, the Company shall pay the executive's estate shall receive one month of salary for each year of service by the executive as an employee or officer of the Company. Change of control shall mean any change in the ownership or control of common stock of Company resulting in more than 50% of its issued and outstanding common stock being owned or controlled by a person or entity, or a group of persons or entities, who did not own or control more than 50% of the issued and outstanding common stock of the Company as of the date of the employment agreement; or a merger or consolidation of the Company with another entity after which the voting stock of the surviving entity has the same result. 33 Upon a change of control, the termination provisions noted above will be computed without being limited to computation parameters as of September 30, 2006. Accordingly, if Mr. Antenucci resigns within 90 days following a change of control, he shall receive one month of base compensation for each year of service as an employee or officer of the Company and in addition: o all of his stock options shall vest immediately; o all of his shares of stock of the Company shall be promptly registered; and o any incentive bonus remaining unpaid (or unvested if stock options) for the period in which the resignation occurs shall be paid (or vested) immediately, regardless of the executive's performance status. Post-Employment Consulting Mr. Antenucci's employment agreement includes a requirement beginning at time of his termination for the Company to employ him as an advisor and consultant for a period of five years, unless waived by him, for a minimum of 1,000 hours per year for which the Company will pay him compensation equal to one-half of his average annual salary for the last 36 months of his employment with the Company. The consulting service may be renewed or extended by written agreement any time prior to expiration of the five year period. The consulting service terminates upon: o Executive's notice to the Company with or without cause; o The Company's notice to the executive with cause; o Expiration with out renewal or extension; o Inability of the executive to perform because of his mental health or his death. Compensation upon termination of consulting services: o If because of written notice by executive with cause, the Company shall continue his consulting compensation through the end of the agreed period; if without cause no further payment will be made. o If because of written notice by the Company after two years of consulting service with 30 days notice releasing executive from all consulting obligations, the Company shall compensate him at a rate of not less than 50% of the unperformed consulting service over the remaining consulting period at the Company's regular pay intervals unless both parties mutually agree to accelerate payments. o If because of executive's inability to perform is due to health or mental condition and caused by a disability as defined by the Americans with Disabilities Act, the Company shall continue compensation through the end of the consulting period; if the disability does not meet such definition, no further payment is to be made. o If because of executive's death, the Company shall make a lump-sum payment of $200,000 to his estate. Mr. Kevany In 1997 through our subsidiary, PGI-MD, we entered into an employment agreement with Mr. Kevany the term of which was to expire September 30, 2000, but is extended annually if the Company does not notify him of its determination of a new expiration date at least 30 days in advance. Mr. Kevany is entitled to the standard employee benefits available to all employees of PlanGraphics and to vacation and other time off as provided for in the Company's Personal Time-Off Program. In the event of termination of Mr. Kevany's employment agreement, the agreement provides for: o If constructive termination by the Company he receives three months of base compensation and any accrued vacation and accrued awards under any performance bonus plans. 34 o If termination for cause or his voluntary resignation (during the course of the agreement or any renewal thereof), he loses entitlement to all benefits including base salary, stock options and any bonuses immediately on the effective date of termination. o If termination for Death, disability or upon expiration of the agreement, Executive shall be entitled to all benefits under this agreement including incentive bonuses but excluding the base salary. o If he exercises his option to terminate voluntarily after September 30, 2000, the Company shall continue to employ him in a consulting capacity for two years at a rate of one half of his average annual salary over the prior eighteen months during which period the executive will provide the Company a minimum of 500 hours of service per year. There are no change of control provisions in Mr. Kevany's employment agreement. Mr. Chen In 2005 through our subsidiary, PGI-MD, we entered into an employment agreement with Mr. Chen the term of which expired June 5, 2008. The Company did not renew the employment agreement Mr. Chen was entitled to the standard employee benefits available to all employees of PlanGraphics and to vacation and other time off as provided for in the Company's Personal Time-Off Program. In the event of termination of the employment agreement, the agreement provides for: o If termination for the convenience of the Company, executive shall receive three months of base compensation defined as base salary plus continued participation the Company's health insurance program. o If termination for cause, executive shall receive one month of base compensation. o If termination by the Company due to executive's disability the executive shall receive three months of base compensation. o If termination upon expiration of the agreement without renewal or extension executive shall receive three months of base compensation o If termination due to executive's resignation the executive shall receive no base compensation after the required notice period. In the event of executive's death during one of the above periods, any amount owed but unpaid shall be accelerated and paid in a lump sum to the executive's designated beneficiaries within 120 days after the date of death. There were no change of control provisions in Mr. Chen's employment agreement. Director Compensation The Company does not provide any cash compensation to its Directors. The Company does, however, reimburse expenses incurred by our non-employee Directors to attend Board and Committee meetings or other activities on behalf of the Company. Directors who are also our employees do not receive cash or equity compensation for services on our Board in addition to compensation payable for their services as employees. Independent Directors are eligible to participate in any of the Company's stock option plans which may exist and under which non-qualified stock options may be granted. The Company's previous Equity Compensation Plan has expired although outstanding unexpired stock options granted under it continue to be valid until their expiration dates. Indemnification of Directors Pursuant to the Company's articles of incorporation, the Company provides indemnification of its directors and officers to the fullest extent permitted under the Colorado Business Corporation Act and provides certain indemnification to its executive officers under their employment agreements. The Company believes that this indemnification is necessary in attracting and retaining qualified directors and officers. 35 ITEM 11 -- SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Securities Authorized for Issuance Under Equity Compensation Plans. Equity Compensation Plan Information (As of September 30, 2008) (a) (b) (c) Number of securities Weighted average remaining available for Number of securities to be exercise price of future issuance under equity issued upon exercise of outstanding compensation plans outstanding options, options, warrants (excluding securities Plan Category warrants and rights and rights re-reflected in column (a)) - ------------- ------------------- ----------------- --------------------------- Equity Compensation plans approved by security holders 5,966,432 $0.02 - --------- ----- ----- Total 5,966,432 $0.02 - ========= ===== ===== Security ownership of certain beneficial owners The following parties own more than five percent of our common stock as of December 31, 2008: Amount and nature of Name and address of beneficial ownership beneficial ownership Percent of class ---------------------------------------- -------------------- ---------------- ICTS 1994 (USA) Inc.(1) 1 Rockefeller Plaza, Suite 2412 New York, NY 10020 17,142,857 Sole dispositive and voting power 17.6% Gary S. Murray, Sr. C/O Human Vision LLC(2) 8181 Professional Place, Suite 200 17,702,345 Landover, MD 20785 Sole dispositve and voting power 18.2% - --------------------- (1) According to information on Schedule 13G filed with the SEC on March 21, 2002, ICTS 1994 (USA) Inc., a corporation organized in the State of New York, holds 17,142,857 shares of our Common Stock. Based upon information in that filing, M. Albert Nissim, President, has sole voting control over the corporation. (2) Information for Mr. Gary S. Murray, a former director of the Company, includes Human Vision LLC, an organization in which he is a control person, are based on the most recent information available to the Company as filed by Mr. Murray on Form 4 with the SEC on October 13, 2004. Mr. Murray was a control person of Human Vision LLC at that time. We are unaware of any changes in these holdings subsequent to that date. The quantities reflect shares of common stock only and exclude any options to acquire common stock which have since expired or terminated. Security ownership of management: Directors and officers of PGRA owned the following percentages of our common stock as of September 30, 2008: 36 Amount and nature of Percent of Name and address of beneficial ownership Beneficial Ownership class ---------------------------------------- -------------------- ----- John C. Antenucci President, CEO and Director c/o PlanGraphics, Inc. 112 East Main Street 12,655,025(1) Frankfort, KY 40601 Sole dispositive and voting power 11.3% Frederick G. Beisser Senior Vice President - Finance, Secretary and Treasurer c/o PlanGraphics, Inc. 10940 S. Parker Rd, #533 1,479,900(2) Parker, Colorado 80134 Sole dispositive and voting power 1.5% All Directors and Officers As a group (2 persons) 14,134,925 12.3% - ------------------ (1) Includes 6,610,790 shares of common stock issuable pursuant to the exercise of options and 205,000 shares of common stock owned by Mr. Antenucci's spouse and minor child, for which he is deemed to be a beneficial owner. (2) Includes 1,000,000 shares of common stock issuable pursuant to the exercise of options. ITEM 12 -- CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE John C. Antenucci, President and a director of PGRA, is a 10% partner in Capital View Development, LLC, the owner of the facilities in Frankfort, Kentucky leased by PGI-MD. Effective June 1, 2005, the annual lease cost for such facilities is approximately $105,000 per year for 10,500 square feet. PGI-MD entered into the original facility lease in 1995 and recently terminated the capital lease and entered into a new operating lease for the same facility. The transaction was considered to be in the best interests of PGI-MD when the original lease was signed and most recently in June 2005, when the new lease was agreed to, by the disinterested members of its Board of Directors. John C. Antenucci, President and a director of PGRA, personally guaranteed an obligation of PGRA on September 22, 1998. As consideration for such guaranty, PGRA agreed to pay Mr. Antenucci 5% of the outstanding loan balance on an annual basis. PGRA has not paid all monies owed to Mr. Antenucci pursuant to this agreement. The agreement was considered to be in the best interests of PGRA at the time of the agreement by the disinterested members of its Board of Directors. As of January 7, 2005, when we entered into the new financing arrangement with KCap, the guarantee obligations of Mr. Antenucci were terminated and the remaining balance owed to Mr. Antenucci was $97,120 at that date, at September 30, 2008, the balance was $88,954, and also as of October 31, 2008. Board Membership and Director Independence Our board of directors consists of one employee director. Although we have had compensation and audit committees in the past, those committees are presently inactive pending the appointment of non-employee directors. There are no familial relationships between our board of directors and officers or employees of the Company. During the fiscal year 2008, the board of directors held two meetings. Each of our current directors attended at least 75% of the aggregate total of meetings of the board of directors. 37 ITEM 13 -- EXHIBITS The following exhibits are filed as part of this Report: Exhibit Number Description of Exhibit 2.1 Acquisition Agreement between DCX, Inc. and PlanGraphics, Inc. (filed with Current Report, Form 8-K, on September 24, 1998 and incorporated herein by reference) 3.1 Amended and Restated Articles of Incorporation of PGRA (filed with our Definitive Proxy Statement dated May 3, 1991 and incorporated herein by reference). 3.2 Articles of Amendment to the Articles of Incorporation dated May 02, 2002 changing the name of the Company to PlanGraphics, Inc. (filed with our Annual Report on Form 10-KSB on December 30, 2002 and incorporated herein by reference). 3.3 Amended and Restated Bylaws of PlanGraphics, Inc. adopted by the Board of Directors on October 7, 2002 (filed with our Annual Report on Form 10-KSB on December 30, 2002 and incorporated herein by reference). 3.4 Amendment to Articles of Incorporation filed with the Colorado Secretary of State on August 18, 2006 (filed on Form 8-K, dated August 16, 2006, and incorporated herein by reference). 4.1 Specimen Stock Certificate of PlanGraphics, Inc. (filed with our Annual Report on Form 10-KSB on December 30, 2002 and incorporated herein by reference). 4.2 1998 Equity Incentive Plan (filed with Annual Report on Form 10-KSB on January 13, 1998 and incorporated herein by reference). 4.3 Equity Compensation Plan (filed with Registration Statement on Form S-8 on September 8, 1999 and incorporated herein by reference). 4.4 Series A Preferred Stock Purchase Agreement, dated August 21, 2006, between PlanGraphics, Inc. and Nutmeg Group, LLC. (filed on Form 8-K, dated August 16, 2006, and incorporated herein by reference). 4.5 Form of Warrant issued to Nutmeg Group pursuant to the Series A Preferred Stock Purchase Agreement (filed on Form 8-K, dated August 16, 2006, and incorporated herein by reference). 10.1 Customer Contract with the City of New York (filed with Registration Statement on Form SB-2/A on August 20, 2001 and incorporated herein by reference). 10.2 Form of Extension of Employment Agreement, letter dated December 21, 2005 (filed on Form 8-K, dated January 9, 2006 and incorporated herein by reference). 10.3 Employment Agreement between PGRA and Frederick G. Beisser, dated January 1, 2002 and executed on May 2, 2002 (filed with quarterly report for March 31, 2002 and incorporated herein by reference). 10.4 Extension of Beisser Employment Agreement, dated December 28, 2004 (filed on Form 8-K, dated December 22, 2004 and incorporated herein by reference). 10.5 Extension of Beisser Employment Agreement, letter dated August 30, 2005 (filed on Form 8-K, dated August 30, 2005 and incorporated herein by reference). 10.6 Amendment One of Beisser Employment Agreement, dated February 16, 2007 (filed on Form 8-K, dated January 31, 2007, and incorporated herein by reference) 10.7 Amendment Two of Beisser Employment Agreement, dated December 26, 2007 (filed on Form 8-K, dated January 3, 2008, and incorporated herein by reference) 10.8 Amendment Three of Beisser Employment Agreement, dated December 1, 2008 (filed herewith) 10.9 Employment Agreement between PGRA and John C. Antenucci, dated and executed on May 1, 2002 (filed with quarterly report for March 31, 2002 and incorporated herein by reference). 38 10.10 Extension of Antenucci Employment Agreement, amendment dated March 25, 2005 (filed on Form 8-K, dated March 25, 2005). 10.11 Extension of Antenucci Employment Agreement, second amendment dated November 9, 2005 (filed on Form 8-K, dated November 9, 2005) 10.12 Extension of Antenucci Employment Agreement, dated January 31, 2007 (filed on Form 8-K, dated January 31, 2007 and filed herein by reference). 10.13 Extension of Antenucci Employment Agreement, dated December 26, 2007 (filed on Form 8-K, dated January 3, 2008 and filed herein by reference). 10.14 Extension of Antenucci Employment Agreement, dated December 1, 2008 (filed herewith) 10.15 Contract with New York State Office of Cyber Security and Critical Infrastructure, dated January 4, 2005 (filed on Form 8-K, dated January 4, 2005, and incorporated herein by reference). 10.16 Agreement with K Capital Partners, Inc. executed January 7, 2005 (filed on Form 8-K, dated January 7, 2005 and incorporated herein by reference). 10.17 Form of Membership Purchase Agreement for sale of Jobview holding, dated September 30, 2005 (filed on Form 10-KSB, dated September 30, 2004, filed on January 4, 2006, and incorporated herein by reference). 10.18 Master Factoring Agreement with Rockland Credit Finance LLC executed February 17, 2005 (filed on Form 8-K, dated February 17, 2005, and incorporated herein by reference). 10.19 First Amendment to Master Factoring Agreement with Rockland Credit Finance, LLC, dated January 9, 2006 (filed on Form 8-K, dated January 9, 2005, and incorporated herein by reference). 10.20 Second Amendment to Master Factoring Agreement with Rockland Credit Finance, LLC, dated November 26, 2008 (filed herewith) 14.1 Code of Ethics for Senior Financial Officers implemented by Board Decision on October 7, 2002 (filed with our Annual Report on Form 10-KSB on December 30, 2002, and incorporated herein by reference). 21.1 List of Subsidiaries.* 31.1 Sarbanes-Oxley Certification for the principal executive officer, dated January 14, 2009.* 31.2 Sarbanes-Oxley Certification for the principal financial officer, dated January 14, 2009.* 32.1 Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 which is dated January 14, 2009.* - ----------------- * Filed herewith. 39 ITEM 14 -- PRINCIPAL ACCOUNTANT FEES AND SERVICES Aggregate fees billed by our principal independent registered public accounting firms for audits of the financial statements for the fiscal years indicated: 2008 2007 $ $ ----------- ----------- Audit Fees $ 58,500 $ 57,000 Audit-Related Fees(1) - - Tax Fees - - All Other Fees - - ----------- ----------- Total $ 58,500 $ 57,000 Percentage of hours on audit engagement performed by non-FTEs: The audit work performed by non-full time employees was less than 50% of total time. Audit pre-approval policies and procedures: In accordance with the Amended and Restated Audit Committee Charter of March 21, 2003 as provided with our Proxy Statement dated April 1, 2003, the Board of Directors, acting as the Audit Committee, reviewed with the independent auditors, Sherb & Co. LLP, and financial management of the Company the scope of the proposed audit and timing of quarterly reviews for the current year and as well as non-audit services requested and the audit procedures to be utilized. The Board of Directors, acting as the Audit Committee, also approves in advance all audit and any non-audit services for which the independent auditors may be retained. 40 SIGNATURES In accordance with Section 13 or 15(d) 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. Date: January 16, 2009 PlanGraphics, Inc. By: /s/ John C. Antenucci ------------------------------------- John C. Antenucci President and Chief Executive Officer In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date - ---------------------------------- ----------------------------------------------------- ---------------- /s/ Fred Beisser Senior Vice President--Finance, Secretary and - ---------------------------------- Treasurer, (principal financial & accounting officer) Frederick G. Beisser and Director January 16, 2009 /s/ John C. Antenucci - ---------------------------------- CEO, President (principal Executive officer) and John C. Antenucci Director January 16, 2009 41
PLANGRAPHICS, INC. Financial Statements September 30, 2008 and 2007 TABLE OF CONTENTS Page ---- REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM F-2 FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS F-3 CONSOLIDATED STATEMENTS OF OPERATIONS F-4 CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT F-5 CONSOLIDATED STATEMENTS OF CASH FLOWS F-6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS F-7 F-1 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors PlanGraphics, Inc. We have audited the accompanying consolidated balance sheets of PlanGraphics, Inc. and Subsidiaries as of September 30, 2008 and 2007 and the related consolidated statements of operations, changes in stockholders' deficit and cash flows for the years then ended. These consolidated financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards as established by the Auditing Standards Board (United States) and in accordance with the auditing standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal controls over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purposes of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of PlanGraphics, Inc. and Subsidiaries, as of September 30, 2008 and 2007 and the consolidated results of their operations and their cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. The Company has suffered recurring losses and has a negative working capital position and a stockholders' deficit. These factors raise substantial doubt about the Company's ability to continue as a going concern. Management's plans with regard to these matters are described in Note B. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Sherb & Co., LLP Certified Public Accountants Boca Raton, Florida January 12, 2009 F-2
PLANGRAPHICS, INC. - --------------------------------------------------------------------------------------------- CONSOLIDATED BALANCE SHEETS September 30, ASSETS 2008 2007 ------------ ------------ CURRENT ASSETS Cash and cash equivalents Cash $ 404 $ 36,711 Restricted cash -- 41,931 ------------ ------------ 404 78,642 Accounts receivable, less allowance for doubtful accounts of $49,718 and $0 for 2008 and 2007, respectively 733,472 1,074,944 Prepaid expenses and other 20,405 30,362 ------------ ------------ Total current assets 754,281 1,183,948 ------------ ------------ PROPERTY AND EQUIPMENT Equipment and furniture 371,117 367,515 Less accumulated depreciation and amortization 347,948 337,837 ------------ ------------ 23,169 29,678 ------------ ------------ OTHER ASSETS Software development costs, net of accumulated amortization of $822,986 and $657,967 in 2008 and 2007, respectively 187,743 284,932 Other 8,016 10,518 ------------ ------------ 195,759 295,450 ------------ ------------ TOTAL ASSETS $ 973,209 $ 1,509,076 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Mandatory redeemable Series A preferred stock, $0.001 par value, 500 shares issued and outstanding at September 30, 2008 and 2007 $ 500,000 $ 500,000 Notes payable - current maturities 42,650 182,786 Accounts payable 2,786,834 2,558,265 Accrued payroll costs 201,331 304,366 Accrued expenses 380,637 367,217 Deferred revenue and prebillings 312,303 351,974 ------------ ------------ Total current liabilities 4,223,755 4,264,608 Notes payable - long-term, less current maturities -- 34,541 ------------ ------------ TOTAL LIABILITIES 4,223,755 4,299,149 ------------ ------------ STOCKHOLDERS' DEFICIT Common stock, no par value, 2,000,000,000 shares authorized, 99,158,706 and 97,214,418 shares issued and outstanding 20,706,005 20,697,839 Accumulated deficit (23,956,551) (23,487,912) ------------ ------------ TOTAL STOCKHOLDER'S DEFICIT (3,250,546) (2,790,073) ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 973,209 $ 1,509,076 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. F-3 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF OPERATIONS Years ended September 30, 2008 2007 ------------ ------------ Revenues $ 3,614,016 $ 4,219,538 Costs and expenses Direct contract costs 2,083,681 2,475,861 Salaries and employee benefits 1,110,669 1,262,567 General and administrative expenses 566,959 590,605 Marketing expenses 16,843 26,945 Other operating expenses 224,848 121,447 ------------ ------------ Total costs and expenses 4,003,000 4,477,425 ------------ ------------ Operating loss (388,984) (257,887) ------------ ------------ Other income (expense): Other income 63,253 70,691 Interest expense (142,908) (182,353) ------------ ------------ (79,655) (111,662) ------------ ------------ Net loss $ (468,639) $ (369,549) ============ ============ Basic and diluted loss per common share $ (0.00) $ (0.00) ------------ ------------ Weighted average shares of common stock outstanding - basic and diluted 97,772,206 97,214,418 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. F-4 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' DEFICIT Years ended September 30, 2008 and 2007 Common Stock --------------------------- Total Shares Amount Accumulated Stockholders' Deficit Equity (Deficit) ------------ ------------ ------------ --------------- Balance, September 30, 2006 97,214,418 $ 20,697,839 $(23,118,363) $ (2,420,524) Net loss -- -- (369,549) (369,549) ------------ ------------ ------------ ------------ Balance at September 30, 2007 97,214,418 20,697,839 (23,487,912) (2,790,073) Issue of common stock upon option exercise 1,944,288 8,166 -- 8,166 Net loss -- -- (468,639) (468,639) ------------ ------------ ------------ ------------ Balance at September 30, 2008 99,158,706 $ 20,706,005 $(23,956,551) $ (3,250,546) ============ ============ ============ ============ The accompanying notes are an integral part of these consolidated financial statements. F-5 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended September 30, 2008 2007 --------- --------- Cash provided by (used in) operating activities: Net loss $(468,639) $(369,549) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 175,130 220,566 Allowance for doubtful accounts 49,718 (100,586) Changes in operating assets and liabilities Accounts receivable 291,755 613,629 Prepaid expenses and other 9,957 47,386 Other assets 2,502 (1,102) Accounts payable 228,569 157,736 Accrued expenses (81,449) (46,845) Deferred revenue and prebillings (39,671) (265,044) --------- --------- Net cash provided by operating activities 167,872 256,191 --------- --------- Cash flows provided by (used in) investing activities: Purchases of equipment (3,602) (13,383) Software developed for future use (67,831) (84,877) --------- --------- Net cash used in investing activities (71,433) (98,260) --------- --------- Cash flows provided by (used in) financing activities: Payments on debt (174,677) (81,184) --------- --------- Net cash used in financing activities (174,677) (81,184) --------- --------- Net increase (decrease) in cash (78,238) 76,747 Cash and cash equivalents at beginning of year 78,642 1,895 --------- --------- Cash and cash equivalents at end of year $ 404 $ 78,642 ========= ========= The accompanying notes are an integral part of these consolidated financial statements. F-6
PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS September 30, 2008 and 2007 NOTE A - COMPANY BACKGROUND AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. The Company These consolidated financial statements include the accounts of PlanGraphics, Inc. (a Colorado Corporation) and those of its wholly owned subsidiary PlanGraphics, Inc. (a Maryland Corporation) and the latter's wholly owned subsidiaries, RTD2M and Xmarc Ltd (collectively the "Company"). All significant inter-company accounts and transactions have been eliminated in consolidation. The Company is a full life-cycle systems integration and implementation firm providing a broad range of services in the design and implementation of information technology in the public and commercial sectors. The Company has extensive experience with spatial information systems and e-services. The Company's customers are located in the United States and foreign markets requiring locational or "spatial" information. Approximately 59% of its revenue comes from customers in federal, state and local governments and utilities; 25% from international; and the remaining 16% from commercial enterprises within the United States. International revenues are derived from various countries and as a percent of total revenue the countries are: Italy 13%, China 6%, England 4%, and the remaining 2% from Holland, Australia and Portugal. 2. Cash and Cash Equivalents; Restricted Cash The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Restricted cash consisted of funds in a bank account controlled by a vendor pursuant to a contractual agreement. 3. Management Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported revenues and expenses during the reporting periods. Significant changes in the estimates or assumptions, or in actual outcomes related to them, could possibly have a material impact on the financial statements. The Company's operations require it to make significant assumptions concerning cost estimates for labor and expenses on contracts in process. Due to the uncertainties inherent in the estimation process of costs to complete for contracts in process, it is possible that completion costs for some contracts may have to be revised in future periods. 4. Allowance for Doubtful Accounts We make estimates of the collectibility of our accounts receivable. We specifically analyze accounts receivable and historical bad debts, client credit-worthiness, current economic trends, and changes in our client payment terms and collection trends when evaluating the adequacy of our allowance for doubtful accounts. Any change in the assumptions used in analyzing a specific account receivable may result in additional allowance for doubtful accounts being recognized in the period in which the change occurs. F-7 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 5. Property, Equipment and Depreciation and Amortization Property and equipment are recorded at cost less accumulated depreciation or amortiztion. Depreciation is computed primarily using the straight-line method over the estimated useful lives ranging from 5 to 31 years. Depreciation and amortization expense on property and equipment was $175,130 and $220,566 for the years ended September 30, 2008 and 2007, respectively. Maintenance and repairs are charged to expense as incurred and expenditures for major improvements are capitalized. When assets are retired or otherwise disposed of, the property accounts are relieved of costs and accumulated depreciation, and any resulting gain or loss is credited or charged as an expense to operations. 6. Revenue and Cost Recognition We recognize revenue in accordance with SEC Staff Accounting Bulletin 104 "Revenue Recognition" ("SAB 104"). SAB 104 provides guidance on the recognition, presentation, and disclosure of revenue in financial statements and updates Staff Accounting Bulletin Topic 13 to be consistent with Emerging Issues Task Force Issue No. 00-21, "Revenue Arrangements with Multiple Deliverables" ("EITF 00-21"). We recognize revenues when (1) persuasive evidence of an arrangement exists, (2) the services have been provided to the client, (3) the sales price is fixed or determinable, and (4) collectibility is reasonably assured. Revenues from fixed fee projects are recognized on the percentage of completion method using total costs incurred to date to determine the percent complete. Revenues for projects are recognized as services are provided for time and material projects. Revisions in cost and profit estimates during the course of the work are reflected in the accounting period in which they become known. Contract costs include all direct material and labor costs and those indirect costs related to contract performance, such as subcontracted labor, supplies, tools, repairs and depreciation costs. General and administrative costs are charged to expense as incurred. Deferred revenue represents retainage and prepayments in connection with these contracts, as well as amounts billed in excess of amounts earned under percentage of completion accounting. 7. Income Taxes The Company files United States federal and state income tax returns for its domestic operations, and files separate foreign tax returns for its United Kingdom subsidiary. The Company accounts for income taxes under SFAS No. 109, "Accounting for Income Taxes." Deferred income taxes result from temporary differences. Temporary differences are differences between the tax bases of assets and liabilities and their reported amounts in the financial statements that will result in taxable or deductible amounts in future years. F-8 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 8. Net Loss Per Share Basic income (loss) per share is computed by dividing net income (loss) by weighted average number of shares of common stock outstanding during each period. Diluted income per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Exercise of outstanding stock options is not assumed if the result would be antidilutive, such as when a net loss is reported for the period or the option exercise price is greater than the average market price for the period presented. The following is a reconciliation of the weighted average number of shares used in the Basic Earnings Per Share ("EPS") and Diluted EPS computations: Year ended September 30, 2008 2007 ---- ---- Basic EPS share quantity 97,772,206 97,214,418 Effect of dilutive options and warrants * -- -- ---------- ---------- Diluted EPS share quantity 97,772,206 97,214,418 *For the net-loss periods ended September 30, 2008 and 2007, we excluded any effect of the 5,966,432 and 8,447,790 outstanding options and warrants, respectively, as their effect would be anti-dilutive. 9. Research and Development costs Research and development costs are expensed as incurred. The amounts for fiscal years 2008 and 2007 were insignificant. 10. Concentrations of Credit Risk The Company's financial instruments that are exposed to concentrations of credit risk consist of cash and cash equivalent balances in excess of the insurance provided by governmental insurance authorities. The Company's cash and cash equivalents are placed with reputable financial institutions and are primarily in demand deposit accounts. The Company did not have balances in excess of FDIC insured limits as of September 30, 2008, or at September 30, 2007. Because of large but infrequent payments that may be received from major customers, account balances may exceed FDIC insured limits for very short periods. Concentrations of credit risk with respect to accounts receivable are associated with a few customers dispersed across geographic areas. The Company reviews a customer's credit history before extending credit and establishes an allowance for doubtful accounts based upon the credit risk of specific customers, historical trends and other information. Generally, the Company does not require collateral from its customers, as a significant number of the customers are governmental entities. F-9 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 11. Fair Value of Financial Instruments The carrying values of financial instruments including cash and cash equivalents, accounts receivable, accounts payable, accrued expenses and payroll costs approximate fair value due to the relatively short maturity of these instruments. However considerable judgment is required in interpreting market data to develop estimates of fair value. Consequently, the estimates may not necessarily be indicative of the amounts that could be realized or would be paid in a current market exchange. The carrying values of notes payable and capital lease obligations reported on the consolidated balance sheets approximate their respective fair values. 12. Segment Information The Company follows the provisions of SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement establishes standards for the reporting of information about operating segments in annual and interim financial statements. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker(s) in deciding how to allocate resources and in assessing performance. In the opinion of management, the Company operates in one business segment, business information services, and all revenue from its services and license fees and royalties are made in this segment. Management of the Company makes decisions about allocating resources based on this one operating segment. The Company has three geographic regions for its operations, the United States, Europe and Asia. Revenues are attributed to geographic areas based on the location of the customer. The following graph depicts the geographic information expected by FAS 131: Geographic Information Long-lived Accounts Revenues Assets Receivable ---------- ---------- ---------- 2008 ---- North America $2,799,856 $ 207,591 $ 504,866 Europe 595,804 3,321 257,629 Asia 218,356 -- -- ---------- ---------- ---------- Total $3,614,016 $ 210,912 $ 762,495 2007 ---- North America $3,314,817 $ 309,866 $ 806,297 Europe 553,953 4,744 268,647 Asia 350,768 -- -- ---------- ---------- ---------- Total $4,219,538 $ 314,610 $1,074,944 F-10 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 13. Recognition of Expenses in Outsourced Work Pursuant to management's assessment of the services that have been performed by subcontractors on contracts and other assignments, we recognize expenses as the services are provided. Such management assessments include, but are not limited to: (1) an evaluation by the project manager of the work that has been completed during the period, (2) measurement of progress prepared internally or provided by the third-party service provider, (3) analyses of data that justify the progress, and (4) management's judgment. Several of our contracts extend across multiple reporting periods. 14. Stock-Based Compensation Expense Prior to January 1, 2006, the Company accounted for share-based awards to employees using the intrinsic value method in accordance with Accounting Principle Board Opinion No. 25, "Accounting for Stock Issued to Employees" and related interpretations and provided the pro forma disclosure requirements of Statement of Financial Accounting Standards No. 123, "Accounting For Stock-Based Compensation." Effective January 1, 2006, the Company adopted Statement of Financial Accounting Standards No. 123 (revised 2004), Share Based Payment ("SFAS No. 123R"). SFAS No. 123R establishes the financial accounting and reporting standards for stock-based compensation plans. The Company adopted SFAS No. 123R using the modified prospective method, and, therefore, prior periods were not restated. Under the modified prospective method, companies are required to record compensation expense for (1) the unvested portion of previously issued awards that remain outstanding at the initial date of adoption, which we did not have, and (2) for any awards issued, modified or settled after the effective date of the statement which we also did not have. The Company recognizes stock compensation expenses over the requisite service period of the award, normally the vesting term of the options which are generally immediately fully vested and exercisable. As required by SFAS No. 123R, the Company has recognized the cost resulting from all stock-based payment transactions including shares issued under its stock option plans in the financial statements. See Note I, Item 2, below, for further discussion. 15. 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 accounting period. Net sales and expenses denominated in foreign currencies are translated at the actual rate of exchange incurred for each transaction during the period. The total of all foreign currency transactions and translation adjustments were considered not to be material as of the end of the reporting period. We conduct business in a number of foreign countries and, therefore, face exposure to slight but sometimes adverse movements in foreign currency exchange rates. International revenue of $936,776 was about 26% of our total revenue in 2008, of which about $904,262, or 25% of our total revenue, was denominated in a currency other than U.S dollars. Accordingly, a 10% change in exchange rates could increase or decrease our revenue by $90,426. Since we do not use derivative instruments to manage foreign currency exchange rate risks, the consolidated results of operations in U.S. dollars may be subject to some amount of fluctuation as foreign exchange rates change. In addition, our foreign currency exchange rate exposures may change over time as business practices evolve and could have a material impact on our future financial results. F-11 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Our primary foreign currency exposure is related to non-U.S. dollar denominated sales, cost of sales and operating expenses related to our international operations. This means we are subject to changes in the consolidated results of operations expressed in U.S. dollars. Other international business, consisting primarily of consulting and systems integration services provided to international customers in Asia, is predominantly denominated in U.S. dollars, which reduces our exposure to fluctuations in foreign currency exchange rates. There have been and there may continue to be period-to-period fluctuations in the relative portions of international revenue that are denominated in foreign currencies. The net amount of foreign currency gains and (losses) was a gain of $8,675 for fiscal year (FY) 2008 and a gain of $10,007 for FY 2007. In view of the foregoing, we believe our exposure to market risk is limited. 16. Recent Accounting Pronouncements FSP 142-3. In April 2008, the Financial Accounting Standards Board ("ASB") issued Financial Statement of Position ("FSP") 142-3, "Determination of the Useful Life of Intangible Assets", (FSP 142-3). FSP 142-3 amends the factors that should be considered in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under SFAS No. 142, "Goodwill and Other Intangible Assets". FSP 142-3 is effective for fiscal years beginning after December 15, 2008. The Company is currently assessing the potential impact of FSP 142-3 on its consolidated financial position and results of operations. SFAS 162. In May 2008, the FASB issued Statement of Financial Accounting Standard ("FAS") No. 162, "The Hierarchy of Generally Accepted Accounting Principles ("GAAP")." SFAS No. 162 identifies the sources of accounting principles (see below) and provides entities with a framework for selecting the principles used in preparation of financial statements that are presented in conformity with GAAP. The current GAAP hierarchy has been criticized because it is directed to the auditor rather than the entity, it is complex, and it ranks FASB Statements of Financial Accounting Concepts, which are subject to the same level of due process as FASB Statements of Financial Accounting Standards, below industry practices that are widely recognized as generally accepted but that are not subject to due process. The Board believes the GAAP hierarchy should be directed to entities because it is the entity (not its auditors) that is responsible for selecting accounting principles for financial statements that are presented in conformity with GAAP. The adoption of FASB 162 is not expected to have a material impact on the Company's consolidated financial position and results of operations. The sources of accounting principles that are generally accepted are categorized in descending order as follows: a) FASB Statements of Financial Accounting Standards and Interpretations, FASB Statement 133 Implementation Issues, FASB Staff Positions, and American Institute of Certified Public Accountants (AICPA) Accounting Research Bulletins and Accounting Principles Board Opinions that are not superseded by actions of the FASB. b) FASB Technical Bulletins and, if cleared by the FASB, AICPA Industry Audit and Accounting Guides and Statements of Position. F-12 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) c) AICPA Accounting Standards Executive Committee Practice Bulletins that have been cleared by the FASB, consensus positions of the FASB Emerging Issues Task Force (EITF), and the Topics discussed in Appendix D of EITF Abstracts (EITF D-Topics). d) Implementation guides (Q&As) published by the FASB staff, AICPA Accounting Interpretations, AICPA Industry Audit and Accounting Guides and Statements of Position not cleared by the FASB, and practices that are widely recognized and prevalent either generally or in the industry. SFAS 163. In May 2008, the FASB issued SFAS No. 163, "Accounting for Financial Guarantee Insurance Contracts-an interpretation of FASB Statement No. 60." Diversity exists in practice in accounting for financial guarantee insurance contracts by insurance enterprises under FASB Statement No. 60, Accounting and Reporting by Insurance Enterprises. This results in inconsistencies in the recognition and measurement of claim liabilities. This Statement requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. This Statement requires expanded disclosures about financial guarantee insurance contracts. The accounting and disclosure requirements of the Statement will improve the quality of information provided to users of financial statements. Management has concluded that, because the Company is not involved in the insurancy industry, the adoption of FASB 163 is not expected to have a material impact on the Company's consolidated financial position and results of operations. FSP 14-1. In May 2008, the FASB issued FASB Staff Position (FSP) APB 14-1, "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)." APB 14-1 requires the issuer to separately account for the liability and equity components of convertible debt instruments in a manner that reflects the issuer's nonconvertible debt borrowing rate. The guidance will result in companies recognizing higher interest expense in the statement of operations due to amortization of the discount that results from separating the liability and equity components. APB 14-1 will be effective for financial statements issued for fiscal years beginning after December 15, 2008, and interim periods within those fiscal years. The Company is currently evaluating the impact of adopting APB 14-1 on its consolidated financial statements. EITF No. 03-6-1. In June 2008, the Financial Accounting Standards Board ("FASB") issued FASB Staff Position ("FSP") No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities ("EITF 03-6-1"). EITF 03-6-1 addresses whether instruments granted in share-based payment transactions are participating securities prior to vesting and, therefore, need to be included in the earnings allocation under the two-class method of calculating earnings per share. EITF 03-6-1, which is applied retrospectively, will become effective for the Company beginning January 1, 2009. The Company is currently evaluating the potential impact of EITF 03-6-1 on its consolidated financial statements. Emergency Economic Stabilization Act. The Emergency Economic Stabilization Act of 2008 (the Act) was enacted on October 3, 2008, and requires the SEC to conduct a study on mark-to-market accounting as provided in SFAS No. 157 applicable to financial institutions, including depository institutions. The study will focus on a number of areas, including the advisability and feasibility of modifications to the standard, and alternative accounting standards to those provided in SFAS No. 157. The Company does not presently have transactions or account balances subject to SFAS 157, but will continue to monitor and evaluate the Act for any potential impacts. F-13 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) 17. Reclassifications Certain reclassifications have been made to the fiscal 2007 financial statements to conform to the fiscal 2008 financial statements' presentation. Such reclassifications have no effect on financial position or net loss available to common shareholders as previously reported. 18. Purchased and Internally Developed Software Costs for Future Project Use The Company follows SOP 98-1, Accounting for the Cost of Computer Software Developed or Obtained for Internal Use. Purchased software is recorded at the purchase price. Software products that are internally developed are capitalized when a product's technological feasibility has been established. Amortization begins when a product is available for general release to customers. The amortization is computed on a straight-line basis over the estimated economic life of the product, which is generally three years, or on a basis using the ratio of current revenue to the total of current and anticipated future revenue, whichever is greater. Amortization expense amounted to $165,019 and $188,786 for FYs 2008 and 2007, respectively. All other research and development expenditures are charged to research and development expense in the period incurred. Management routinely assesses the utility of its capitalized software for future usability in customer projects. No impairments were recorded in 2008. NOTE B - LIQUIDITY CONSIDERATIONS The Company has an accumulated deficit of $23,956,551 at September 30, 2008, and although total liabilities have decreased by $75,394, the Company's working capital deficit rose to $3,469,474 at September 30, 2008 and it has recurring net losses in fiscal years (FYs) 2008 back to 1998. Future viability of the Company is dependent upon the Company's ability to achieve profitability in its future operations. The Company's Master Factoring Agreement with Rockland Credit Finance, LLC ("Rockland") expires on Septmeber 30, 2009. The Company reported a net loss of $468,639 for FY 2008 versus a net loss of $369,549 for FY 2007. The Company experienced a decrease in revenue of $605,522, or 14%, during FY 2008 as a result of slowed tax revenue receipts in state and local government customers and has attempted to further reduce costs and expenses in all categories. In FY 2009 it expects to report similar revenue, continued negative working capital and continued cash flow delays. These constrained cash flows adversely affect the Company's ability to meet payroll, subcontractor and other payment obligations on a timely basis. On occasion, payroll disbursements to employees were delayed resulting in payments made subsequent to normal due dates. Delayed payments to subcontractors have caused work stoppages and, at times, adversely affected the Company's ability to service certain of its major projects and to generate revenue. F-14 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE B - LIQUIDITY CONSIDERATIONS (Continued) Operations in recent years have been financed by the following sources: o revenue generated from operations; o factoring of accounts receivable at high interest rates, o accretion of accounts payable to vendors and subcontractors, o sale of redeemable preferred stock; and o loans from principal shareholders and employees, including deferred payments of payroll. The Company continues to take actions to leverage its technical capabilities and reputation and to increase revenue from its more profitable software sales and the related cash flows as well as to reduce its controllable costs and expenses to the maximum extent possible. On January 9, 2009, the Company executed a letter of intent with a merchant banking company for the sale of its Xmarc line of business; proceeds will be applied to the most critical needs of the Company. NOTE C - ACCOUNTS RECEIVABLE At September 30, the components of contract receivables were as follows: 2008 2007 ---------- ---------- Billed $ 544,720 $ 715,659 Unbilled 238,470 359,285 ---------- ---------- 783,190 1,074,944 Less allowance for doubtful accounts 49,718 -- ---------- ---------- Accounts receivable, net $ 733,472 $1,074,944 ========== ========== Unbilled receivables represent work-in-process that has been performed but has not yet been billed. This work will be billed in accordance with milestones and other contractual provisions. Unbilled work-in-process includes revenue earned as of the last day of the reporting period which will be billed in subsequent days. The amount of unbilled revenues will vary in any given period based upon contract activity. Receivables include retainages receivable representing amounts billed to customers that are withheld for a certain period of time according to contractual terms, generally until project acceptance by the customer. At September 30, 2008 and 2007, retainage amounted to $168,434 and $144,282, respectively. Management considers all retainage amounts to be collectible. F-15 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE C - ACCOUNTS RECEIVABLE (Continued) Billed receivables include $37,597 for the net amount of factored invoices due from Rockland. This amount is comprised of the amount of outstanding uncollected invoices on hand at Rockland ($244,837) less the net amount of funds employed by Rockland in servicing them ($207,240) which consists of actual cash advances, payments, and other reserves and fees related to the factoring agreement. Pursuant to the factoring agreement we have granted Rockand a lien and security interest in all of our cash, accounts, goods and intangibles. The Company has historically received greater than 10% of its annual revenues from one or more customers creating some amount of concentration in both revenues and receivables. At September 30, 2008, customers exceeding 10% of accounts receivable were the Italian Ministry of Finance ("IMOF"), 24%, New York City Department of Environmental Engineering ("NYDEP"), 19%. At the same date, customers exceeding 10% of revenue for the year were NYDEP, 26%, San Francisco Department of Technology and Information Systems ("SFDTIS"), 16%, and the IMOF, 12%. At September 30, 2007, customers exceeding 10% of accounts receivable were NYDEP, 27%, IMOF, 17%, and Panzhihua Municipal Planning Office (China), 16%. At the same date, customers exceeding 10% of revenue for the year were NYDEP, 34%, SFDTIS, 11%. Deferred revenue amounts of $312,303 and $351,974 at September 30, 2008 and 2007, respectively, represent amounts billed in excess of amounts earned. NOTE D - ACCOUNTS PAYABLE Accounts payable at September 30 consist of: 2008 2007 ---- ---- Trade payables $1,333,529 $1,249,704 Payable to subcontractors 1,347,369 1,304,669 Other payables 105,936 3,892 ---------- ---------- Total accounts payable $2,786,834 $2,558,265 ========== ========== NOTE E - ACCRUED EXPENSES Accrued expenses at September 30 are as follows: 2008 2007 ---- ---- Accrued expenses due to vendors and subcontractors $ 41,210 $ 67,939 Accrued interest 263,479 234,353 F-16
PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE F - NOTES PAYABLE (CONTINUED) Accrued professional fees 67,003 53,000 Other accrued expenses 8,945 11,925 -------- -------- Total accrued expenses $380,637 $367,217 ======== ======== NOTE F - NOTES PAYABLE Notes payable at September 30 are as follows: 2008 2007 ---- ---- An uncollateralized promissory note with a vendor in the original amount of $11,500, interest rate of 12%. The note, requiring monthly payments of $1,916 matured on September 15, 2006 and is currently in default. $ 7,668 $ 7,668 An uncollateralized promissory note with a vendor in the original amount of $91,509, interest rate of 5%. An initial payment of $25,000 was due January 31, 2007 followed by 12 monthly payments of $5,694. 11,317 33,669 An uncollateralized promissory note with a vendor in the original amount of $44,631, non-interest bearing. The note matured December 31, 2005, when a single payment of the entire amount became due. As a result, the interest rate increased to 10%. Final payment was made on May 30, 2008. -- 23,709 An uncollaterlized promissory note with a vendor in the original amount of $185,000, interest rate of 9.5%. The note matured June 21, 2001 when final payment of $23,665 was due and is currently in default. As a result the interest rate increased to 13.5%. 23,665 23,665 The purchase price of Xmarc technology owed to HPI in the amount of $250,000 payable in equal installments over five years with interest imputed at 6.5%. The amount was evidenced by an uncollateralized agreement effective April 1, 2003, and has since been paid in full. -- 128,616 -------- -------- Total notes payable 42,650 217,327 Less: Current maturities 42,650 182,786 -------- -------- Notes payable - long-term $ -- $ 34,541 ======== ======== F-17 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE G - TAXES ON INCOME The provision for income taxes consisted of the following: 2008 2007 ---- ---- Current expense: Federal $ -- $ -- State -- 3,173 Foreign expense -- 715 --------- --------- $ -- $ 3,188 ========= ========= Deferred expense (benefit): Federal ($393,000) ($121,000) State (38,000) (12,000) --------- --------- (431,000) (133,000) Change in valuation allowance 431,000 133,000 --------- --------- $ -- $ -- ========= ========= A reconciliation of the effective tax rates and the statutory U.S. federal income tax rates is as follows: 2008 2007 ---- ---- U.S. federal statutory rates (34.0%) (34.0%) State income tax, net of federal tax benefit (3.3) (3.3) Permanent differences - - Foreign income taxes, net of federal tax benefit - .2 (Increase) decrease in deferred tax asset valuation allowance 37.3 40.1 ---- ---- Effective tax rate - % 3.0% ==== ==== Temporary differences that give rise to a significant portion of the deferred tax asset are as follows: 2008 2007 ---- ---- Deferred tax assets: Net operating loss carryforwards $ 7,719,000 $ 7,129,000 Provision for losses on accounts receivable 8,000 -- Accrued payroll costs and vacation 32,000 40,000 ----------- ----------- Total gross deferred tax asset 7,759,000 7,169,000 Deferred tax liabilities: Deferred income of foreign corporation (441,000) (282,000) ----------- ----------- 7,318,000 6,887,000 Valuation allowance (7,318,000) (6,887,000) ----------- ----------- Net deferred tax asset $ -- $ -- =========== =========== A valuation allowance equal to the net deferred tax asset has been recorded as management of the Company has not been able to determine that it is more likely than not that the net deferred tax assets will be realized. During the year ended September 30, 2008, the valuation allowance increased by $431,000. F-18
PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE G - TAXES ON INCOME (CONTINUED) At September 30, 2008, the Company had estimated net operating loss carryforwards of approximately $19.9 million with expirations through 2028. The utilization of the loss carry forwards may be limited under Internal Revenue Service Code Section 382 regulations in the event of changes of ownership. NOTE H - COMMITMENTS AND CONTINGENCIES 1. Obligations Under Operating Lease - Related Party The Company leases an office facility from Capitol View Development, LLC, a partnership, which includes a related party, under a triple net commercial lease. An officer/shareholder owns approximately ten percent of Capitol View Development, LLC. The annual lease amount is $102,500 excluding taxes, insurance and maintenance costs. 2. Operating Lease Commitments The Company leases certain office facilities and certain furniture and equipment under various operating leases. The remaining lease terms range from one to five years. Minimum annual operating lease commitments at September 30, 2008 are as follows: Year ending September 30, 2009 139,236 2010 110,727 2011 105,242 2012 102,500 2013 102,500 Thereafter 375,833 -------- $936,038 ======== Rental expense for the years ended September 30, 2008 and 2007 totaled $163,198 and $161,867, respectively. 3. Licensing Agreement The Company entered into a licensing agreement under which it obtained exclusive North American rights to Xmarc, Ltd., intellectual property and spatial integration software owned by a Swiss based investment company, HPI Holding SA and a Cayman Island company, Glendower Opportunity Partners II, collectively the Xmarc Sellers ("XS"), for use in the public sector and utility markets. Under the agreement the Company supports former Xmarc clients, work in progress and outstanding proposals and pay XS, a royalty stream for a period of 21 months ending September 30, 2003 as it receives revenue for the product licensing and maintenance. F-19 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE H - COMMITMENTS AND CONTINGENCIES (CONTINUED) Under the agreement the Company also had the right to acquire in perpetuity the exclusive rights to Xmarc intellectual property and technology and all subsequent product enhancements for the North American public sector and utility markets. Effective April 1, 2003 the Company exercised its right to acquire the intellectual property. As a result, the Company paid XS the amount of $50,000 annually on March 31 in the years 2004 through 2008 (see Note F) and royalty payments for amounts due for each of these years in which the royalties earned exceeds $50,000. During FY 2008 the Company had recorded approximately $736,235 in revenues earned under the revenue license agreement and $24,172 in royalties. 4. Employment Agreements On April 30, 2002, the Company entered into new employment agreements with its officers. One of them was effective January 1, 2002 for one year and the third was effective on May 1, 2002 for three years. The employment agreements set forth annual compensation to the employees of between $66,000 and $157,000 each. Under the employment agreements, each employee is entitled to between 18 months and three years of severance pay upon termination of their employment for reasons other than constructive termination. On the anniversary date of his employment agreement, the chief executive officer is entitled to receive options to acquire common stock equal to 1% of the outstanding shares of the Company's common stock. The Company extended the employment agreements of its two officers through December 31, 2008. During FY 2007 the Company granted stock options to acquire a total of 2,750,000 shares of common stock to the two officers as inducement to extend their employment agreements to December 31, 2008. Pursuant to the employment agreement for the chief executive officer, stock options to acquire 972,144 and 972,144 of common stock were granted during FY 2007 and 2008. Recently both agreements were extended through September 30, 2009. 5. KSTC Agreement On June 16, 2003, the Company's subsidiary, PlanGraphics, Inc. ("PGI-MD"), entered into a two-year agreement with Kentucky State Technology Corporation ("KSTC") to develop classification algorithms to delineate and classify wetlands in commercial satellite images, field verify the imagery interpretation and to establish a marketing program for these value added wetlands imagery product to potential governmental and business clients. KSTC provides $200,000 under the agreement on a cost share matching basis for cash and in-kind services provided. The Company has established a wholly owned subsidiary, RDT2M, as required by the agreement, and has selected Murray State University to work with RDT2M. Murray State University will receive 51% and RDT2M will receive 49% of the funding. The agreement provides for payment to the Company of certain development expenses of approximately $200,000. The agreement also requires the Company's repayment of up to $400,000, including the grant amount, through a royalty stream based on free cash flow if a commercial and sustainable market is developed for the products. Should no viable market be established, repayment of the grant amount is waived. On June 7, 2004, KTSC renewed the agreement, which can again be renewed, and increased the repayment provision up to $800,000. F-20 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE H - COMMITMENTS AND CONTINGENCIES (CONTINUED) 6. Xmarc Ltd. 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, the Company completed a purchase transaction with an effective date of March 31, 2004, in which it acquired Xmarc Ltd in a non-cash transaction for $64,647. Payment was made by forgiveness of accounts receivable due to the Company 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, which has resulted in revenue of $760,407 during FY 2008, enhances its strategic development and prospects for growth. NOTE I - EQUITY TRANSACTIONS 1. Preferred Stock As of September 30, 2008, the Company had authorized 20,000,000 shares of preferred stock, 500 of which were issued and outstanding at September 30, 2008 and 2007, respectively. Accrued interest includes dividends payable to the holder of the preferred stock amounting to $125,094 and $64,931 at September 30, 2008, and 2007, respectively. The shares of preferred stock may be issued from time to time in one or more series. The Company's board of directors is expressly authorized, without further approval by shareholders, to provide for the issue of all or any of the shares of the preferred stock in one or more series, and to fix the number of shares and to determine or alter for each such series, such voting powers, full or limited, or no voting powers, and such designations, preferences, and relative, participating, optional, or other rights and such qualifications, limitations, or restrictions thereof, as shall be adopted by the board of directors and as may be permitted by law. On August 21, 2006, the Company entered into a Series A Preferred Stock Purchase Agreement with Nutmeg Group, LLC pursuant to which it sold and Nutmeg Group, LLC bought, for an aggregate purchase price of $500,000, a total of 500 shares (the "Shares") of the Company's Series A 12% Redeemable Preferred Stock (the "Series A Preferred Stock") and a warrant to purchase shares of the Company's common stock equal to 80 percent of the fully diluted outstanding shares with an aggregate exercise price of $10.00 (the "Warrant,"). The Series A Preferred Stock is non-voting and is not convertible into shares of the company's common stock. The holder of Series A Preferred Stock may require the registrant to redeem the Series A Preferred Stock in whole or in part at any time after February 17, 2007. In addition, at any time after August 17, 2007, the Company has the right to redeem the Series A Preferred Stock in whole or in part. The Company used the net proceeds of the sale of the Securities to pay certain professional fees, to satisfy certain of its accounts payable, and for general working capital purposes. The investor did not exercise the Warrant prior to its expiration date. F-21 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE I - EQUITY TRANSACTIONS (CONTINUED) 2. Stock-Based Compensation As noted above, the Company follows provisions of SFAS No. 123R in accounting for share-based payments to employees, including grants of employee stock options, and recognizes related expenses in the statement of operations as compensation expense (based on their fair values) over the vesting period of the awards. The Company's option valuation model (the Black-Scholes model) requires the input of highly subjective assumptions including the expected life of the option. Because the Company's employee stock options have characteristics significantly different from those of traded options (which it does not have), and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models do not, in management's opinion, necessarily provide a reliable single measure of the fair value of the Company's employee stock options. The Company granted options to acquire 972,144 shares of common stock during the quarter ended June 30, 2008 of the fiscal year ended September 30, 2008. Using the Black Scholes valuation model, the Company determined the fair value of the underlying shares to be $0. A summary of the status of the Company's stock option plans, changes and outstanding options and warrants as of September 30, 2008 and 2007 and changes during the years ended on those dates is presented below: F-22
PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE I - EQUITY TRANSACTIONS (CONTINUED) Options Warrants -------------------------------------- ---------------------------------------- Weighted Weighted Number of Average Number of Average Shares Exercise Price Shares Exercise Price ---------------- ---------------- ------------------ ---------------- Outstanding at 9/30/2006 11,316,904 $ 0.021 3,857,212 $ 0.039 Granted 3,722,144 0.012 - - Expired (6,591,258) 0.047 (3,857,212) 0.010 Exercised - - - - ---------------- --------------- ------------------ --------------- Outstanding at 9/30/2007 8,447,790 $ 0.021 - $ - ---------------- --------------- ------------------ --------------- Granted 972,144 0.005 - - Expired (1,509,214) 0.018 - - Exercised (1,944,288) 0.004 - - ---------------- --------------- ------------------ --------------- Outstanding at 9/30/2008 5,966,432 $ 0.021 - $ - ================ =============== ================== =============== Exercisable at 9/30/2007 8,447,790 $ 0.021 - $ - ---------------- --------------- ------------------ --------------- Exercisable at 9/30/2008 5,966,432 $ 0.021 - $ - ---------------- --------------- ------------------ --------------- There were options exercised to acquire 1,944,288 shares of our common stock during the period ending June 30, 2008; the total intrinsic value of options exercised during fiscal year 2008 is $5,444. The range of exercise prices, shares, weighted-average remaining contractual life and weighted-average exercise price for all options and warrants outstanding at September 30, 2008 is presented below: Stock Options --------------------------------------------------------- Range of Weighted-average Exercise Shares Remaining Years Prices Contractual Life --------------------------------------------------------- $0.012-$0.0400 5,966,432 2.17 ------------- 5,966,432 ============= F-23
PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE I - EQUITY TRANSACTIONS (CONTINUED) The fair value of the options granted in the periods ending September 30, 2008 and 2007, was estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions for the above years: 2008 2007 ------------ ------------ Dividend yield 0.00% 0.00% Expected Volatility 311.00% 131.00% Risk free interest rate 3.10% 4.94% Expected lives 5 years 5 years The weighted-average grant date fair value for options granted during 2008 and 2007 was approximately $0 and $0 respectively. For the twelve months ended September 30, 2008 and 2007, net loss and the loss per share reflect the actual deduction for stock-based compensation expense which was was $0 and $0, respectively. The expense for stock-based compensation is a non-cash expense item when it occurs. Because we did not have any unvested options or warrants as of September 30, 2008, there was no unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Equity Compensation Plan. NOTE J - EMPLOYEE BENEFIT PLANS The Company has a Section 401(k) deferred compensation plan covering substantially all employees. The plan allows participating employees to defer up to 20% of their annual salary with a tiered matching contribution by PlanGraphics up to 1.75%. Additional contributions may be made at PlanGraphics' discretion based upon PlanGraphics' performance. During April 2003 the matching contributions were suspended pending improved profitability of the Company; accordingly, no discretionary matching expenses were charged to operations for the plan during the years ended September 30, 2008 and 2007. F-24 PLANGRAPHICS, INC. - ------------------------------------------------------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) September 30, 2008 and 2007 NOTE K - LITIGATION The Company is engaged in various litigation matters from time to time in the ordinary course of business. In the opinion of management, the outcome of any such litigation will not materially affect the financial position or results of operations of the Company. NOTE L - SUBSEQUENT EVENTS On December 1, 2008, the Company extended the employment agreements of its two officers through Septmeber 30, 2009. Effective November 26, 2008, the Master Factoring Agreement with Rockland was extended through September 30, 2009 and the requirement for a minimum borrowing level was eliminated. On December 22, 2008, a subcontractor, Sanborn Map Company, Inc. ("Sanborn"), asserted in a summons filed in the District Court for Douglas County, Colorado, that it is entitled to recover an outstanding amount of $896,475 plus certain unpaid retainage of $18,501 earned for work as a subcontractor to the Company. The Company asserts that the summons was erroneously served. It has also entered into discussions with Sanborn and its representatives to arrive at an acceptable settlement of the amounts in question. On January 9, 2009, the Company signed a letter of intent to sell its Xmarc line of business to a merchant banker. The Company plans to apply initial proceeds to its most critical funding requirements. NOTE M - SUPPLEMENTAL DATA TO STATEMENTS OF CASH FLOWS 2008 2007 ---- ---- Years ended September 30, Cash paid for interest $113,789 $123,107 Cash paid for income taxes 4,393 3,837 F-25 EX-10.8 2 plangraphicsexh108.txt THIRD AMENDMENT Exhibit 10.8 Third Amendment to Executive Employment Agreement Frederick G. Beisser This THIRD AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT (Third Amendment") is entered into as of December 1, 2008 by and between PlanGraphics Inc., a Colorado Corporation, formerly known as Integrated Spatial Information Solution, Inc. (`Employer") and Frederick G. Beisser ("Executive"). WHEREAS, Executive and Employer are parties to an Executive Employment Agreement dated January 1, 2002 ("the Agreement"); and WHEREAS, the term of the Agreement was previously extended from time to time through December 31, 2008, WHEREAS, the parties mutually desire to further extend the term and modify the provisions of the Agreement. NOW THEREFORE, and in consideration of the mutual covenants and agreements hereunder contained, the parties hereby agree as follows: 1) Paragraph 2 of this Agreement is hereby amended to change the Expiration Date to September 30, 2009. 2) As previously agreed, beginning October 1, 2007, provisions for salary deferrals included in the First Amendment are eliminated in their entirety. 3) Provisions for Incentive Bonus as amended in the First and Second Amendments are hereby deleted and replaced with the following conditioned on a positive EBITDA of PlanGraphics Colorado for the Fiscal Year ending September 30, 2009, as follows; a) An amount equal to 2% of gross salary if EBITDA is greater than $50K for any quarter and EBITDA exceeds $50K for the fiscal year. b) An amount equal to 5% of gross salary if EBITDA is greater than $75K for any quarter and EBITDA exceeds $75K for the fiscal year. c) An amount equal to 8% of gross salary if EBITDA is greater than $100K for any quarter and EBITDA exceeds $125K for the fiscal year d) 3% of EBITDA greater than $100,000 per quarter if EBITDA exceeds $400K for the fiscal year. The amounts in the above paragraphs 4a) through 4c) are not cumulative. The amounts paid shall be considered "Additional Compensation" and are subject to applicable withholdings for taxes. Incentive Bonus shall be paid within 15 days of the completion, by internal accounting staff, of the 4th quarter financials for the Company and no later than December 31, 2009 or a change of control. 4) On a change of control, and conditioned on the company having a positive EBITDA at the end of the month prior to the change of control, the Incentive Bonus shall be due and payable. 5) 5) All other terms and condition of the Agreement as amended shall remain unchanged EXECUTIVE PLANGRAPHICS, INC. (Colorado Corporation) /S/ Fred Beisser /S/ John C. Antenucci Frederick G. Beisser John C. Antenucci Dated: December 1, 2008 President and CEO Dated: December 1, 2008 EX-10.14 3 plangraphicsexh1014.txt SIXTH AMENDMENT Exhibit 10.14 Sixth Amendment to Executive Employment Agreement John C. Antenucci This SIXTH AMENDMENT TO EXECUTIVE EMPLOYMENT AGREEMENT (Sixth Amendment") is entered into as of December 1, 2008, by and between PlanGraphics Inc., a Colorado Corporation, formerly known as Integrated Spatial Information Solution, Inc. (`Employer") and John C. Antenucci ("Executive"). WHEREAS, Executive and Employer are parties to an Executive Employment Agreement dated May 1, 2002 ("the Agreement"); and WHEREAS, the term of the Agreement was previously extended from time to time through December 31, 2008, WHEREAS, the parties mutually desire to further extend the term and modify the provisions of the Agreement. NOW THEREFORE, and in consideration of the mutual covenants and agreements hereunder contained, the parties hereby agree as follows: 6) Paragraph 2 of this Agreement is hereby amended to change the Expiration Date to September 30, 2009. 7) As previously agreed to, beginning October 1, 2007, the Executive shall place in a salary-at-risk-account and on prorata semi-monthly basis, fifteen percent (15%) of the Executive's annual salary, $23,550, 8) All other terms and condition of the Agreement as amended shall remain unchanged EXECUTIVE PLANGRAPHICS, INC A Colorado Corporation /S/ John C. Antenucci /S/ Fred Beisser John C. Antenucci Frederick G. Beisser Senior Vice President - Finance and Secretary Date: 12/1/2008 Date: December 1, 2008 EX-10.20 4 plangraphicsexh1020.txt SECOND AMENDMENT Exhibit 10.20 SECOND AMENDMENT TO MASTER FACTORING AGREEMENT This Second Amendment to that Master Factoring Agreement dated February 15th, 2005 between Rockland Credit Finance, LLC ("Rockland") and Plangraphics, Inc. ("Plangraphics") is entered into this 26th day of November, 2008 ("Effective Date"). RECITALS Whereas, the parties entered into the Master Factoring Agreement as amended by that fully executed First Amendment dated January 9, 2006 ("First Amendment") and by further Addendum dated March 6, 2006 (collectively, the "MFA") which is effective and in full force, and Whereas, the parties wish to extend the term of the MFA and modify certain other terms and conditions therein. Therefore, for valuable consideration the sufficiency of which is hereby affirmed, the parties, wishing to be legally bound, agree to the following terms and conditions. 1. From the Effective Date hereof and thereafter, a. Section 2.4 of the MFA as amended by Section 1(b) of the First Amendment (the Guaranteed Monthly Volume) and as further agreed from time to time by the parties, is hereby stricken and of no further force of effect. 2. Notwithstanding anything to the contrary contained in Section 8.1 of the Master Factoring Agreement as amended by Section 2 of the First Amendment and as further agreed from time to time by the parties, the Term of the MFA is hereby extended to September 30, 2009, all other terms and conditions of Section 8.1 of the Agreement remaining unchanged. 3. The terms of this Amendment are incorporated in the MFA by cross-reference. A default or breach of any term hereunder by you or your failure to timely and properly observe, keep or perform any term, covenant, agreement or condition hereunder shall be a default under the MFA as previously amended. 4. This Amendment and the MFA contain the entire agreement of the parties hereto with respect to the matters contemplated hereby, and supercede any and all other agreements, statements, or promises made by any party, or by any employee, officer, agent, attorney of any party hereto, that are not contained herein. 5. Plangraphics specifically intends that this Amendment constitutes and instrument under Seal. 6. All capitalized terms not otherwise defined herein shall have their meaning pursuant to the MFA. 7. No modification or waiver of any provision of this Amendment or the MFA shall be effective unless and until it is in writing and then such waiver shall only be effective for specific instance and for the purpose for which it is given. 8. All other terms and conditions in the MFA not otherwise modified herein shal l remain in full force and effect. The parties, by their signature below, hereby execute their agreement to the foregoing terms and conditions. Rockland Credit Finance, LLC Plangraphics, Inc. By: /S/ John Fox By: /S/ John C Antenucci Name: John Fox Name: John C. Antenucci Title: C.E.O. Title: Pres & CEO Re: Second Amendment to MFA (Plangraphics) EX-21.1 5 plangraphicsexh211.txt SUBSIDIARIES OF THE REGISTRANT Exhibit 21.1 LIST OF ACTIVE SUBSIDIARIES egistered Name State of Incorporation PlanGraphics, Inc. Maryland RDT2M Kentucky Xmarc Limited United Kingdom Xmarc USA, Inc Delaware EX-31.1 6 plangraphicsexh311.txt RULE 13A-14(A)/15D-14(A) CERTIFICATIONS Exhibit 31.1 Certification Sarbanes Oxley - CEO CERTIFICATION OF CHIEF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 I, John C. Antenucci, certify that: (1) I have reviewed this amended annual report on Form 10-KSB of PlanGraphics, Inc. for the year ended September 30, 2008; (2) Based on my knowledge, this annual 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 annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this annual report; (4) The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and c. disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of this annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and (5) The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. /s/ John C. Antenucci. - --------------------------------------- John C. Antenucci. President and Chief Executive Officer Dated: January 16, 2009 EX-31.2 7 plangraphicsexh312.txt RULE 13A-14(A)/15D-14(A) CERTIFICATIONS Exhibit 31.2 Certification Sarbanes Oxley - Financial Officer CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934 I, Frederick G. Beisser, certify that: (1) I have reviewed this amended annual report on Form 10-KSB of PlanGraphics, Inc. for the year ended September 30, 2008; (2) Based on my knowledge, this annual 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 annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this annual report; (4) The small business issuer's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the small business issuer and have: a. designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this annual report is being prepared; b. evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this annual report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and c. disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of this annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and (5) The small business issuer's other certifying officer and I have disclosed, based on our most recent evaluation of internal controls over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a. all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b. any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. /s/ Fred Beisser Frederick G. Beisser Treasurer and Senior Vice President - Finance (Principal Financial Accounting Officer) Dated: January 16, 2009 EX-32.1 8 plangraphicsexh321.txt SECTION 1350 CERTIFICATIONS Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. ss. 1350 AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 Pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, each of the undersigned President & Chief Executive Officer and Principal Financial Accounting Officer of PlanGraphics, Inc. ("the Company"), certifies, that to their knowledge: 1) the Company's amended Form 10-KSB for the annual period ended September 30, 2008 fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and 2) the information contained in the Company's Form 10-KSB for the annual period ended September 30, 2008 fairly presents, in all material respects, the financial condition and results of operations of the Company. /s/ John C. Antenucci /s/ Fred Beisser - ----------------------------------- ------------------------------------- John C. Antenucci Frederick G. Beisser President & Chief Executive Officer Treasurer and Senior Vice President - Finance (and Principal Financial Accounting Officer) Date: January 16, 2009 Date: January 16, 2009 A signed original of this written statement required by Section 906 has been provided to PlanGraphics, Inc. and will be retained by PlanGraphics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. -----END PRIVACY-ENHANCED MESSAGE-----