-----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, O6p7ZzFvV/9aouUmhoI0Qod9Gx/ADEOuQQhu3BlVzzBVA+fAyPtOGqMg/IuevQma jQaW9tyDOx24fiyi4A4+bQ== 0001000096-09-000209.txt : 20090814 0001000096-09-000209.hdr.sgml : 20090814 20090814170701 ACCESSION NUMBER: 0001000096-09-000209 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 7 CONFORMED PERIOD OF REPORT: 20090630 FILED AS OF DATE: 20090814 DATE AS OF CHANGE: 20090814 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: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14273 FILM NUMBER: 091016890 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 10-Q 1 plang63009.txt FORM 10-Q (JUNE 30, 2009) UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2009. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ___________ to _______________ . Commission file number 0-14273 PLANGRAPHICS, INC. --------------------------------------------------------------- (Exact name of small business issuer as specified in its charter) COLORADO 84-0868815 ------------------------------ ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 112 East Main Street Frankfort, KY 40601 -------------------------------------- (Address of principal executive offices) (Zip Code) (502) 223-1501 ---------------------------------------------- (Issuer's telephone number, including area code) --------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X ] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. Large Accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [X] Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes [ ] No [X] 500,718,173 shares of common stock (no par value) were outstanding as of August 11, 2009. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS Information in this Quarterly Report on Form 10-Q and the information incorporated by reference includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995 and are covered by its safe harbor provisions for such forward-looking statements. Forward-looking statements may relate to, among other things, our expected financial position and operating results, our business strategy, our financing plans and the outcome of any contingencies. Our use of forward-looking words such as "may," "believe," "plan," "will," "anticipate," "estimate," "expect," "intend," and similar expressions are intended to identify such statements. Forward-looking statements are based on currently available information and our current assumptions, expectations and projections about future events. We undertake no obligation to update such statements except as required by law. You are cautioned not to place undue reliance on our forward-looking statements as they are not guarantees of future performance. Forward-looking statements include, but are not limited to, statements in this Form 10-Q regarding: o availability of working capital to meet our immediate cash and liquidity needs; o our ability, or the ability of Integrated Freight to complete the contemplated transactions as described herein; o our ability to raise funds through debt and equity financing; o estimates regarding our financing needs; o our prospects for growth, both accretive and acquisitive; 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 key clients; o the increase in competition and our ability to compete effectively; o our ability to take advantage of targeted markets; o the strength of our technical expertise and customer service; o the potential fluctuation of the market price of our stock; o the potential gross profit margin ; o the projections regarding our financial results for fiscal years ("FY") 2009 and 2010; 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 expressed in our 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 not be able to complete, or complete in a timely fashion, the transaction with Integrated Freight as described herein; o we may continue to experience significant liquidity issues and may not overcome the underlying causes; o we may not be able to obtain needed financing for operations or diversification; o o We may not find an adequate market for our services in the current economic environment; o we may experience work stoppages by subcontractors due to our 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 achieve profitability; o we may not adequately anticipate and respond to technological developments impacting our services; and o we may issue a substantial number of shares of our common stock upon exercise of options and warrants to secure funds, thereby causing dilution in the value of your investment. The above list identifies some of the principal factors that could cause actual results to differ materially from those in the forward-looking statements included elsewhere in this report but does not represent a complete list of all risks and uncertainties inherent in our business. It should be read in conjunction with the more detailed cautionary statements included in our Annual Report on Form 10-KSB for the year ended September 30, 2008, and our other Securities and Exchange Commission filings, and our press releases. 2 PlanGraphics, Inc. Table of Contents Part I Financial Information 4 Item 1. Consolidated Financial Statements (Unaudited) 4 Consolidated Balance Sheets 4 Consolidated Statements of Operations 5 Consolidated Statements of Cash Flows 6 Notes to Unaudited Consolidated Financial Statements 7 Item 2. Management Discussion and Analysis 15 Item 4. Controls and Procedures 19 Part II Other Information 20 Item 1. Legal Proceedings 20 Item 2. Unregistered Sales of Equity Secuirities and Use of Proceeds 20 Item 6. Exhibits 20 Signature Page 22 Exhibits 23 Part I Financial Information Item 1. Financial Statements
PlanGraphics, Inc. CONSOLIDATED BALANCE SHEETS June 30, 2009 September 30, 2008 (Unaudited) (Derived from audtited financial statements) ASSETS CURRENT ASSETS Cash and cash equivalents $ 89 $ 202 Prepaid expenses and other 4,121 -- Current assets of discontinued operations 488,450 754,079 ------------ ------------ Total current assets 492,660 754,281 ------------ ------------ PROPERTY AND EQUIPMENT Equipment and furniture 2,000 2,000 Less accumulated depreciation and amortization (2,000) (2,000) Long-term assets of discontinued operations 15,433 23,169 ------------ ------------ 15,433 23,169 ------------ ------------ OTHER ASSETS Other assets of discontinued operations 113,976 195,759 ------------ ------------ 113,976 195,759 ------------ ------------ TOTAL ASSETS $ 622,069 $ 973,209 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Mandatory redeemable Series A preferred stock, $0.001 par value, nil and 500 shares issued and outstanding at June 30, 2009, and at September 30, 2008, respectively $ -- $ 500,000 Notes payable - current maturities 37,668 7,668 Accounts payable 173,393 142,778 Accrued payroll costs 20,361 13,256 Accrued expenses 116,721 244,052 Current liabilities of discontinued operations 3,254,574 3,316,001 ------------ ------------ Total current liabilities 3,602,717 4,223,755 ------------ ------------ Total liabilities 3,602,717 4,223,755 ------------ ------------ STOCKHOLDERS' DEFICIT Common stock, no par value, 2,000,000,000 shares authorized, 500,718,173 and 99,158,706 shares issued and outstanding at June 30, 2009 and September 30, 2008, respectively 21,368,578 20,706,005 Accumulated deficit (24,349,226) (23,956,551) ------------ ------------ Total Stockholders' Deficit (2,980,648) (3,250,546) ------------ ------------ TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 622,069 $ 973,209 ============ ============ See accompanying notes to unaudited consolidated financial statements 4 PlanGraphics, Inc. CONSOLIDATED STATEMENTS OF OPERATIONS Unaudited) For the three and nine month periods ended June 30, Nine months ended Three months ended 2009 2008 2009 2008 ------------- ------------- ------------- ------------- Revenues $ -- $ -- $ -- $ -- Costs and expenses Salaries and employee benefits 49,973 55,841 14,971 18,488 General and administrative expenses 99,579 98,585 46,329 33,722 Marketing expenses -- 455 -- -- ------------- ------------- ------------- ------------- Total costs and expenses 149,552 154,881 61,300 52,210 ------------- ------------- ------------- ------------- Operating loss (149,552) (154,881) (61,300) (52,210) ------------- ------------- ------------- ------------- Other expense: Interest expense (38,307) (45,041) (7,846) (14,959) ------------- ------------- ------------- ------------- (38,307) (45,041) (7,846) (14,959) ------------- ------------- ------------- ------------- Loss from continuing operations (187,859) (199,922) (69,146) (67,169) ------------- ------------- ------------- ------------- Discontinued operations Operating loss from discontinued operations (289,194) (86,436) (148,764) (29,108) Other Income 127,139 63,365 3,533 19,985 Interest Expense (42,773) (65,541) (6,843) (3,602) ------------- ------------- ------------- ------------- Loss from discontinued operations (204,828) (88,612) (152,074) (12,725) Net loss $ (392,687) $ (288,534) $ (221,220) $ (79,894) ============= ============= ============= ============= Basic and diluted loss per common share Loss from continuing operations $ (0.001) $ (0.002) $ (0.000) $ (0.001) Loss from discontinued operations (0.001) (0.001) (0.001) (0.000) ------------- ------------- ------------- ------------- Net loss per common share $ (0.003) $ (0.003) $ (0.001) $ (0.001) ============= ============= ============= ============= Weighted average number of common shares outstanding 146,698,861 97,214,418 244,779,172 97,214,418 See accompanying notes to unaudited consolidated financial statements 5 PlanGraphics, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the nine months ended June 30, 2009 2008 --------- --------- Cash flows provided by operating activities: Loss from discontinued operations $(204,828) $ (88,612) Loss from continuing operations (187,859) (199,922) --------- --------- Net loss (392,687) (288,534) Adjustments to reconcile net loss to net cash provided by operating activities: Changes in operating assets and liabilities Prepaid expenses and other (4,121) (4,112) Accounts payable 30,614 22,527 Accrued expenses 42,346 27,908 --------- --------- Net cash used in continuing operating activities (323,848) (242,211) --------- --------- Adjustments to reconcile net loss to net cash provided by discontinued operating activities: Depreciation and amortization 88,951 147,578 Allowance for doubtful accounts (35,555) 19,825 Gain on debt extinguishment (7,414) -- Gain on fair value recognition of accounts payable (91,516) -- Net change in discontinued operating assets and liabilities 333,910 234,232 --------- --------- Net cash provided by discontinued operating activities 288,376 401,635 --------- --------- Net cash provided by (used in) operating activities (35,472) 159,424 --------- --------- Cash flows used in investing activities: Purchases of equipment -- (3,602) Software developed for future use (806) (58,706) --------- --------- Net cash used in investing activities - discontinued operations (806) (62,308) --------- --------- Cash flows provided by (used in) financing activities: Cash flows provided by continuing operations Proceeds from debt 30,000 -- --------- --------- Net cash provided by continuing operations 30,000 -- --------- --------- Cash flows provided by discontinued operations Proceeds from note payable - related party 13,750 -- Payments on debt (6,623) (174,677) --------- --------- Net cash provided by (used in) discontinued operations 7,127 (174,677) --------- --------- Net cash provided by (used in) financing activities 37,127 (174,677) --------- --------- Net increase (decrease) in cash 849 (77,561) Cash and cash equivalents at beginning of year 404 78,642 --------- --------- Cash - continuing operations 89 35 Cash - discontinued operations 1,164 1,046 --------- --------- Cash and cash equivalents at end of period $ 1,253 $ 1,081 ========= ========= See accompanyint notes to unaudited consolidated financial statements 6 PLANGRAPHICS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (1) Consolidated Financial Statements The summary of our significant accounting policies is incorporated herein by reference to our annual report of September 30, 2008, on Form 10-KSB filed with the Securities and Exchange Commission. Readers are also herewith advised to read the going concern statement in the report of our Independent Registered Accounting Firm and also the liquidity caution in Note B in our consolidated financial statements for the period ended September 30, 2008. The accompanying unaudited consolidated financial statements in this report have been presented on the going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. While we secured an improved factoring agreement for accounts receivable during 2007 and 2008 that has been extended through September 30, 2009, and a similar factoring agreement with Bibby Financial Services in support of our Xmarc subsidiary, that we implemented in June , 2009, our viability to continue as a going concern is dependent upon our ability to achieve and increase profitable operations through increased sales and the higher profit margins received from Xmarc sales. During the fiscal years of 1998 through 2008 we have experienced significant operating losses with corresponding reductions in working capital and stockholders' equity. Beyond our factoring agreements, we do not currently have any external financing in place to support operating cash flow requirements. Our revenues and backlog have also decreased substantially. To address the going concern issue, management implemented financial and operational plans to improve operating efficiencies, reduce overhead and accelerate cash from our contracts, reduce and eliminate cash losses, and position us for future profitable operations. We have reduced our general and administrative expenses by reducing occupancy costs, streamlining our executive and administrative support team, and using attrition to reduce costs. The accompanying unaudited consolidated financial statements for PlanGraphics, Inc. and its operating subsidiary in this quarterly report reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results of operations, financial position and cash flows. All significant inter-company balances and transactions have been eliminated in our consolidation. We believe that the disclosures are adequate to make the information presented not misleading. The results of this interim period are not necessarily indicative of the results for the full fiscal year ending September 30, 2009. These consolidated financial statements should be read in conjunction with the Company's financial statements and notes for the year ended September 30, 2008, included in the Company's Annual Report on Form 10-KSB. Reclassifications resulting from discontinued operations. During the current quarter, the Company determined to sell its operating subsidiary, PlanGraphics of Maryland (including its two subsidiaries). Accordingly, the related assets and liabilities were reclassified in the current report as held for sale in the consolidated balance sheets in accordance with Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting for the Disposal and Impairment of Long-Lived Assets" ("SFAS 144") and Emerging Issues Task Force ("EITF") Issue No. 03-13, "Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in Determining Whether to Report Discontinued Operations" ("EITF 03-13"). Both current and historical operating results of the subsidiary have been reclassified as discontinued operations. Depreciation and amortization on long-lived assets of the subsidiary were also reclassified to discontinued operations. Certain amounts in the Company's condensed consolidated financial statements for prior periods have also been reclassified to conform to the current period presentation. (2) Going Concern Statement and Management's Plan Going Concern. As reported in the consolidated financial statements accompanying our annual report on Form 10-KSB for the year ended September 30, 2008, the Company incurred net losses for the years ended September 30, 2008 and 2007. The Company has also suffered recurring losses, has a negative working capital position and a stockholders' deficit. As noted in the auditor's report on our September 30, 2008, financial statements, these factors raise substantial doubt about the Company's ability to continue as a going concern. 7 For the nine months ended June 30, 2009, the Company is reporting a net loss of $392,687 and cash used in operations amounted to $35,472, representing further deterioration of both net loss and cash flows from the same period of the prior year. The Company has had a history of net losses over the years. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence. Management has taken aggressive action to reduce operating costs to the maximum extent possible and has taken steps intended to increase the sales of the Company's products and services. Management continues to seek financing to provide funds needed to increase liquidity, fund growth in revenues and to implement its business plan. We continue to explore sources of working capital from additional debt or equity financings or from the sale of certain assets. In the absence of one of these alternatives our ability to operate our business and fund our operations could be materially and adversely affected. No assurance can be given that the Company will be able to raise any additional capital. Board's Plan for PlanGraphics, Inc. PlanGraphics has experienced declining revenues in the past several years. The costs for audits, legal advice, other items related to the Company's SEC reporting and maintaining its status as a public company are significant and are having an adverse effect on our ability to successfully operate our core business. Based on this combination of declining revenues and increasing costs, in 2003, the Company's Board of Directors began examining strategic alternatives for PlanGraphics and retained a number of specialist investment banking firms to assist with this process. Through these efforts, and in parallel with efforts to maintain and build on our traditional lines of business, the Board has concluded that in order to provide shareholders with some opportunity for achieving value on their investment PlanGraphics needs to aggressively pursue the option of deriving value from one or more of the assets of the corporation. One such option that the Company has pursued in recent years is the spin-off of PGI-MD and the sale of PlanGraphics, the public entity, to a private company interested in becoming a publicly traded corporation. The Company has issued 401,559,467 shares of its common stock in satisfaction of the redemption payment obligations for its outstanding Series A Redeemable Preferred Stock to Integrated Freight Systems, Inc., who had purchased the outstanding preferred stock from the Nutmeg Group. The issue of these shares resulted in a change in control of PlanGraphics. Integrated Freight, as the 80.2% majority stockholder of PlanGraphics, has demanded a special shareholders' meeting at which the stockholders of PlanGraphics are expected to approve the spin-off of PGI-MD to John Antenucci, our chief executive officer; a reverse stock split; and a merger of PlanGraphics into Integrated Freight. The merger is a statutory merger under both Colorado and Florida corporate law. See also Note 14, Subsequent Events. Discontinued Operations. Pending completion of the merger noted above, the Company has assigned the assets and liabilities of its operating subsidiary, PGI-MD which is now considered held for sale, to discontinued operations. PlanGraphics Continuing Operations. Pending completion of the merger noted above, the Company's continuing operations consist of administration of the Colorado corporation's public entity which has no revenues and incurs certain ongoing compensation costs, interest and public company reporting expenses. (3) Accounts Receivable - Discontinued Operations The components of contract receivables in discontinued operations are as follows: June 30, 2009 ---------- Billed $ 415,828 Unbilled 61,458 --------- 477,286 Less: net of allowance for doubtful accounts less prior doubtful account amounts written off (14,151) --------- Accounts receivable, net $ 463,135 ========= 8 At June 30, 2009, customers exceeding 10% of billed accounts receivable were the Italian Ministry of Finance ("IMF"), 20%, Liaoning, China , 19%, and Panjin, China, 14%. At the same date, customers exceeding 10% of revenue for the nine month period were the San Francisco Department of Technology and Information Systems, 13%, the IMF, 19%, and Dawson County, Georgia, 14%. At June 30, 2008, customers exceeding 10% of billed accounts receivable were international clients in China (in the aggregate), 18%, New York City Department of Environmental Engineering (NYDEP), 24%, and the Italian Ministry of Finance ("IMF"), 23%. At the same date, customers exceeding 10% of revenue were NYDEP, 23%, San Francisco Department of Technology and Information Systems, 17%, and the IMF, 13%. Billed receivables include $10,378 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 ($69,186) less the net amount of funds employed by Rockland in servicing them ($58,808) which consists of actual cash advances, payments, and other reserves and fees related to the factoring agreement. Pursuant to the factoring agreement Rockland was granted a lien and security interest in all of our cash, accounts, goods and intangibles. Billing terms are negotiated in a competitive environment and are typically based on reaching project milestones. When appropriate we establish a reserve ("allowance for doubtful accounts") for estimated uncollectible amounts of billed and unbilled accounts receivable. When we determine that the collection of a billed or unbilled account receivable related to an active contract is not probable, we reduce the contract value accordingly. When we determine that the collection of a billed or unbilled account receivable related to a completed contract is not probable, we record bad debt expense and increase the allowance for doubtful accounts. When we identify that the collection of a reserved account receivable will not be collected, we write off the account receivable and reduce the allowance for doubtful accounts. Deferred revenue (in discontinued operations) amounted to $113,775 at June 30, 2009, and represents amounts billed in excess of amounts earned. These amounts are offset by work in progress which represents work completed but not yet invoiced but included in Accounts Receivable, typically pending completion of payment milestones. (4) Lease Obligations We lease various equipment as well as facilities under operating leases that expire through the year 2013. (5) Stock-Based Compensation. We follow the provisions of SFAS No. 123R, Share Based Payment. SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations as compensation expense (based on their fair values) over the vesting period of the awards. Option valuation models (we use the Black-Scholes model) to estimate fair value require the input of highly subjective assumptions including the expected life of the option. Because our employee stock options have characteristics significantly different from those of traded options (which we do not have), and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our employee stock options. While we did not grant options to acquire shares of common stock during the period ended June 30, 2009, we granted options to acquire 972,144 shares of common stock during the nine months ended June 30, 2008. There were no options exercised during the period ending June 30, 2009; accordingly, the total intrinsic value of options exercised to date during fiscal year 2009 is $0. Because we did not have any unvested options or warrants as of June 30, 2009, there was no unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the now expired Equity Compensation Plan which continues to have option grants outstanding. 9 Additional information regarding the status of stock options outstanding at June 30, 2009 appears in the following tables; we had no warrants outstanding at that date. Options ------------------------------------ Weighted Number of Average Shares Exercise Price ------ -------------- Outstanding at 9/30/2008 5,966,432 $ 0.021 Granted -- -- Expired or Cancelled (1,272,144) 0.040 Exercised -- -- ---------- --------- Outstanding at 6/30/2009 4,694,288 $ 0.014 ---------- --------- Exercisable at 9/30/2008 5,966,432 $ 0.021 --------- Exercisable at 6/30/2009 4,694,288 $ 0.015 --------- Stock Options ----------------------------------------------------------------- Range of Weighted-average Exercise Shares Remaining Years Prices Contractual Life ----------------------------------------------------------------- $0.0048-$0.015 4,694,288 2.36 (6) Net Loss Per Common Share. Basic loss per share includes no dilution and is computed by dividing income or loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of an entity, when appropriate. The total number of shares of common stock issuable upon exercise of warrants and options outstanding and exercisable at June 30, 2009 and 2008, were 4,694,288 and 5,966,502, respectively. 2009 2008 ---- ---- Options 4,694,288 5,966,502 Warrants -- -- --------- --------- Total outstanding 4,694,288 5,966,502 The following table is a reconciliation of the number of shares used in the Basic Earnings Per Share ("EPS") and Diluted EPS computations: 10 Nine months ended June 30, Three months ended June 30, 2009 2008 2009 2008 ----------- ----------- ----------- ----------- Basic EPS share quantity Weighted average number of shares outstanding 145,093,553 97,214,418 239,027,734 97,214,418 Effect of dilutive options and warrants* -- -- -- -- ----------- ----------- ----------- ----------- Diluted weighted average EPS share quantity 145,093,553 97,214,418 239,027,734 97,214,418 *The closing market price of PGRA on June 30, 2009 was lower than the exercise price of all outstanding options and warrants. Because of that, we assume that none of the outstanding options or warrants at that date would have been exercised and therefore none were included in the computation of diluted earnings per share for periods ended June 30, 2009. Further, for the net-loss periods we excluded any effect of outstanding options and warrants as their effect would be anti-dilutive. (7) Supplemental Cash Flow Information During the nine months ended June 30, 2009, PlanGraphics paid $46,215 of interest and nil for taxes. During the nine months ended June 30, 2008, the Company paid $94,808 of Interest and $1,065 for taxes. Non-cash transactions affecting cash flow computations during the nine-months ending June 30, 2009, were: o Payment of amounts due in liquidation of redeemable preferred stock and accrued dividends which totaled $662,573. o Fair value adjustment of $91,516 to certain liabilities in discontinued operations. o Cancellation of $7,414 of debt in discontinued operations. (8) Foreign Currency Translation Assets and liabilities of the Company's foreign subsidiary in discontinued operations are translated at the rate of exchange in effect at the end of the period. Net sales and expenses 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 resulted in a net loss of $60,463 during the nine-month period ended June 30, 2009. (9) Provision for Income Taxes At the beginning of this fiscal year we had net operating loss carryforwards of $19.9 million with expirations through 2028. At June 30, 2009, the amount of the net operating loss carryforward balance is estimated at $20.3 million. Since we are unable to determine that deferred tax assets exceeding tax liabilities are more likely than not to be realized, we have recorded a valuation allowance equal to the net deferred tax assets at September 30, 2008 and at June 30, 2009. As a result, no provision or benefit for income tax has been recorded for the nine months ended June 30, 2009. (10) Recently Issued Accounting Pronouncements SFAS 107-1 and APB 28-1. In April 2009, the FASB issued Staff Position No. FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments ("FSP FAS 107-1"). FSP FAS 107-1 amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments ("SFAS 107") to require disclosures about fair value of financial instruments in interim reporting periods. Such disclosures were previously required only in annual financial statements. FSP FAS 107-1 is effective for interim reporting periods ending after June 15, 2009. We adopted FSP FAS 107-1 in the third quarter of fiscal year 2009 and have provided any additional disclosures required in Note 11. SFAS 165. In May 2009, the FASB issued SFAS No. 165, Subsequent Events. SFAS No. 165 is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. It requires the disclosure of the date through which an entity has evaluated subsequent events and the basis for that date--that is, whether that date represents the date the financial statements were issued or were available to be issued. SFAS No. 165 is effective for interim and annual periods ending after June 15, 2009, and is to be applied prospectively. We have adopted it as seen in Note 14. 11 SFAS 168. In June 2009, the FASB issued Statement of Financial Accounting Standards No. 168 ("SFAS 168"), "The FASB Accounting Standards CodificationTM and the Hierarchy of Generally Accepted Accounting Principles - a replacement of FASB Statement 162." SFAS 168 provides for the FASB Accounting Standards CodificationTM (the "Codification") to become the single official source of authoritative, nongovernmental U.S. generally accepted accounting principles ("U.S. GAAP"). The Codification is not expected to change U.S. GAAP, but will combine all authoritative standards into a comprehensive, topically organized online database. The Company expects to adopt the use of the Codification for the period ended September 30, 2009. This will have an impact on the Company's financial statement disclosures, as all future references to authoritative accounting literature will be referenced in accordance with the Codification. (11) Fair Value Fair Value Measurements. On October 1, 2008, the Company adopted SFAS No. 157, Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. This Statement applies under other accounting pronouncements that require or permit fair value measurements, the Financial Accounting Standards Board having previously concluded in those accounting pronouncements that fair value is a relevant measurement attribute. Accordingly, this Statement does not require any new fair value measurements. However, for some entities, the application of this Statement will change current practices. The following table sets forth the liabilities the Company has elected to record at fair value under SFAS No. 157 as of June 30, 2009: Fair Value Measurements at June 30, 2009 Using Significant Unobservable Inputs Description (Level 3) - ------------------------------------------------------------------------------- Current liabilities - discontinued operations: Balance before fair value adjustment $ 3,346,090 Charge to accounts payable (91,516) ----------- Balance after fair value charge $ 3,254,574 =========== The Company has antiquated legacy accounts payable balances in discontinued operations that are at least four years old and some as old as ten years that it believes will never require a financial payment for a variety of reasons. Accordingly, under SFAS No. 157, (and in this case for our United Kingdom subsidiary, Financial Reporting Standard 12, "Provisions, Contingent Liabilities and Contingent Assets" ("FRS 12"), since this is where the balances are located) the Company has analyzed the accounts and recorded a charge against those legacy balances as permitted under FSR 12 in the United Kingdom reducing the balances to the amount expected to be paid out. The income recorded during the nine months ended June 30, 2009 was $91,516 and is recorded in other income from discontinued operations on the Company's Consolidated Statement of Operations. Fair Value of Financial Instruments. The carrying amounts of cash equivalents, short-term investments, accounts receivable and accounts payable and accrued expenses approximate fair value due to the short maturities of these items. The carrying value of long-term investments, long-term debt and lease obligations approximates fair value. (12) Transactions Affecting Shareholders' Equity. On January 14, 2009, PlanGraphics, Inc., entered into a business loan in the amount of $30,000 with the holder of all of the outstanding Series A Preferred Stock of PlanGraphics, Nutmeg/Fortuna Fund LLLP (the "Holder"), in the form of a convertible debenture ("the Debenture"). The Debenture provides for an interest rate of 6% per annum with a maturity date of February 28, 2009. Proceeds of the Debenture were applied to certain critical working capital needs. The Debenture is, in the event of default, convertible into common stock of the Company if the default is not timely cured. The Debenture is convertible in whole or in part at a conversion price on the date of conversion at the lesser of $0.002 per share or fifty percent (50%) of the average closing price for the common stock on the five trading days immediately prior to the conversion date. Conversion of the Debenture into common stock of the registrant is limited and the Holder or its affiliates, according to the terms of the Debenture agreement, may not be the 12 beneficial owner of more than 4.99% of the total number of shares of the Company's common stock outstanding immediately after giving effect to the issuance of shares permitted upon conversion by the Holder. Upon not less than 61 days notice to the Company, the Holder may increase or decrease this limitation. The issue of the Debenture was reported on Form 8-K filed with the SEC January 21, 2009. As of March 1, 2009, the Company is in default with regard to the terms of the Debenture, and the Holder has the right to require the Company to convert the amounts owing under the Debenture to common stock. The Debenture will be liquidated concurrent with the pending merger transaction. Issue of Common Stock. On May 29, 2009, in lieu of a cash payment, the Company issued 401,559,467 shares of the Company's common stock (the number of shares that the Company was required to issue in accordance with an agreed upon formula) to Integrated Freight Systems Inc. ("IFSI"), a Florida corporation, to satisfy our obligations for redemption of our Series A Redeemable Preferred Stock and accrued unpaid dividends pursuant to the related Redemption Request. The issuance resulted in a change in control of the Company, with IFSI owning 80.2% of the shares of common stock issued and outstanding after giving effect to the issuance. The shares of Common Stock were issued in reliance on the exemption from registration provided in Section 4(2) of the Securities Act. No commissions or fees were paid in connection with the redemption. The certificates representing the shares were issued with a restrictive legend. (13) Results of Discontinued Operations The discontinued operations of PGI-MD, our operating subsidiary, will continue to fund our limited continuing operations until PGI-MD is sold and the pending merger of PGRA into Integrated Freight are completed. Therefore we are providing the financial position and the operating results for PGI-MD in the disclosures below. Statement of Financial Position - Discontinued Operations June 30, September 30, 2009 2008 ------------- ------------------ (Unaudited) (Derived from audited financial statements) Cash and cash equivalents $ 1,164 $ 202 Accounts receivable, less allowances for doubful accounts of $14,151 and $49,718 463,136 733,472 Prepaid expenses and other 24,150 20,405 Equipment and furniture net of accumulated depreciation of $353,864 and $345,948 15,433 23,169 Software development costs, net of accumulated amortization of $904,201 and $822,986 107,334 187,743 Other assets 6,642 8,016 Notes - payable current maturities (22,665) (34,982) Notes payable to related parties (13,750) -- Accounts payable (2,771,198) (2,644,056) Accrued payroll costs (206,697) (188,075) Accrued expenses (126,488) (136,585) Deferred revenue and prebillings (113,776) (312,303) ----------- ----------- Net liabilities of discontinued operations $(2,636,715) $(2,342,994) =========== =========== 13 Discontinued Operations Income Statement For the three and nine month periods ended June 30, (Unaudited) Nine months ended Three months ended ----------------------------- ----------------------------- 2009 2008 2009 2008 ----------- ----------- ----------- ----------- Revenues from discontinued operations $ 1,569,405 $ 2,942,492 $ 359,742 $ 872,437 Costs and expenses: Direct contract costs 765,052 1,738,745 201,130 491,383 Salaries and employee benefits 648,025 774,290 190,582 239,641 General and administrative expenses 339,121 334,446 84,570 108,767 Marketing expenses 3,315 14,043 2,730 7,438 Other operating expenses 103,086 167,404 29,494 54,316 ----------- ----------- ----------- ----------- Total costs and expenses 1,858,599 3,028,928 508,506 901,545 ----------- ----------- ----------- ----------- Operating loss from discontinued operations (289,194) (86,436) (148,764) (29,108) Other income and expense - discontinued operations: Other income 127,139 63,365 3,533 19,985 Interest expense (42,773) (65,541) (6,843) (3,602) ----------- ----------- ----------- ----------- 84,366 (2,176) (3,310) 16,383 ----------- ----------- ----------- ----------- Loss from discontinued operations $ (204,828) $ (88,612) $ (152,074) $ (12,725) =========== =========== =========== =========== (14) Subsequent Events. Subsequent events have been evaluated through August 13, 2009, one day prior to the date these consolidated financial statements are being issued. The events below required disclosure. Stock Purchase Agreement. The Company has entered into a stock purchase agreement that has an effective date of May 1, 2009. The agreement contemplates the issue of shares of common stock to Integrated Freight in redemption of the then outstanding Series A Redeemable Preferred Stock and accrued dividends which has since then resulted in a change in control of PlanGraphics. Integrated Freight, as the 80.2% majority stockholder of PlanGraphics, has demanded a special shareholders' meeting at which the stockholders of PlanGraphics are expected to approve the spin-off of PGI-MD to John Antenucci, our chief executive officer; a reverse stock split; and a merger of PlanGraphics into Integrated Freight. The merger is a statutory merger under both Colorado and Florida corporate law. The stock purchase agreement is filed with this report as Exhibit 2.1. Convertible Promissory Note. On July 16, 2009, the Company entered into a business loan in the amount of $20,000 with an unrelated entity, Tangiers Investors LP (the "Holder"), in the form of a convertible promissory note ("the Note"). The Note provides for an interest rate of 8% per annum with a maturity date of January 15, 2010. The note bears interest at 8% per annum and has a maturity date six months from the date of issue at which time the accrued interest is due. Default rate of interest is 15% if the note is not cured within 20 days of maturing. The Holder of the note has the right to convert the principal amount into common stock of the Company at 65% of the three lowest volume weighted average prices of the Company's common stock during the 10 day trading period preceding the conversion notice. Any shares that may be issued pursuant to the promissory note are issuable only if an effective registration statement is available to cover the shares or if an exemption from registration is available under Rule 144 of the 1933 Act. Proceeds of the Note were applied to certain working capital needs. 14 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Executive Summary of PlanGraphics, Inc. Historically PlanGraphics has been a full life-cycle systems integration and implementation firm, providing through its operating subsidiary a broad range of services in the design and implementation of information technology related to spatial information management in the public and commercial sectors. As a result of the pending spin off of our operating subsidiary PGI-MD and the pending merger of PGRA into Integrated Freight, we have reclassified our financial records to disclose results by continuing operations for PGRA and discontinued operations for PGI-MD as required by SFAS 144. PGI-MD is now considered and asset held for sale and therefore reported as discontinued operations. In view of this reclassification, during the nine month period ended June 30, 2009, the Company's continuing operations consisted of primarily of satisfying continuous public disclosure requirements and seeking to identify prospective buyers for our operating subsidiary. The Company has been funded in recent years from equity placements, revenue from discontinued operations, and loans from officers and employees. All such capital raised or revenue realized was allocated to working capital for application to costs and expense, general and administrative costs, interest expense, and software development costs. Management's Plan for PlanGraphics, Inc. Management's Plan for PlanGraphics, Inc. PlanGraphics has experienced declining revenues in the past several years. The costs for audits, legal advice and other items related to the Company's SEC reporting and maintaining its status as a public company are significant and are having an adverse effect on our ability to successfully operate our core business. Based on this combination of declining revenues and increasing costs, in 2003, the Company's Board of Directors began examining strategic alternatives for PlanGraphics and retained a number of specialist investment banking firms to assist with this process. Through these efforts, and in parallel with efforts to maintain and build on our traditional lines of business, the Board has concluded that in order to provide shareholders with some opportunity for achieving value on their investment PlanGraphics needs to aggressively pursue the option of deriving value from one or more of the assets of the corporation. One such option that the Company has pursued in recent years is the spin-off of PGI-MD and the sale of PlanGraphics, the public entity, to a private company interested in becoming a publicly traded corporation. Recently, the Nutmeg Group, an investment banking entity that originally purchased $500,000 of our Series A Redeemable Preferred Stock in 2006, presented the Company with such a private company, Integrated Freight Systems Inc., having a desire to become a publicly traded company. Shortly thereafter, Integrated Freight purchased the preferred stock and accrued dividends from Nutmeg. The Company has issued 401,559,467 shares of its common stock in satisfaction of the redemption payment obligations for its outstanding Series A Redeemable Preferred Stock to Integrated Freight Systems, Inc., who had purchased the preferred stock from the Nutmeg Group. The issue of these shares resulted in a change in control of PlanGraphics. Integrated Freight, as the 80.2% majority stockholder of PlanGraphics, has demanded a special shareholders' meeting at which the stockholders of PlanGraphics are expected to approve the spin-off of PGI-MD to John Antenucci, our chief executive officer; a reverse stock split; and a merger of PlanGraphics into Integrated Freight. The merger is a statutory merger under both Colorado and Florida corporate law. See also Note 14, Subsequent Events. 15 Financial Condition The following discussion of liquidity and capital resources addresses our requirements and sources as of June 30, 2009 and should be read in conjunction with the accompanying unaudited consolidated interim financial statements and the notes to those statements appearing elsewhere in this report and our audited consolidated financial statements and the notes thereto for the year ended September 30, 2008, appearing in our FY 2008 Form 10-KSB. Readers should take into account the auditor's going concern statement as well as the liquidity caution appearing in Note B of the September 30, 2008 financial statements. The Company's cash needs for continuing operations have historically been met by funds provided by its operating subsidiary which is now reclassified into discontinued operations. Cash Flow The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During fiscal years 1998 through 2008, we experienced significant losses with corresponding reductions in working capital and net worth, excluding the impact of certain one time gains. Our revenues and backlog have also decreased substantially during the past two years. We have struggled to maintain a minimal cash flow necessary to meet our barebones operating and capital requirements and have been be forced to restrict operating expenditures to match available resources. These factors, among others, raise substantial doubt about our ability to continue as a going concern. We continue to experience significant liquidity issues that cause us to finance the needed resources with funds from now discontinued operations and accretion of amounts owed to creditors. As a result, from time to time we have delayed payment of subcontractor invoices. As of June 30, 2009, we had a net working capital deficit of ($3,110,057) compared with a net working capital deficit of ($3,469,474) at September 30, 2008. Cash provided by operations. In the nine months ended June 30, 2009, operations used net cash of $35,472, as compared to $159,424 provided by operations during the period ended June 30, 2008. This $194,896 change from the prior year was primarily a result of: A decrease of $104,150 in cash used to fund our current year net loss of $392,687 versus $288,537 for the prior year plus a net change of $22,516 for changes in operating assets and liabilities of continuing operations which decreased the cash used, plus a decrease of $113,262 in cash provided by discontinued operations. The latter decrease was a result of gains from extinguishments of debt and from the application of fair value accounting to certain aged payables. Cash used by investing activities. In the period ended June 30, 2009, investing activities used cash of $806 versus $62,308 used in investing activities during the period ended June 30, 2008. The primary reason for the change was decreased purchases of software for future use in the current period. All activity was from discontinued operations. Cash provided by and used in financing activities. During the period ended June 30, 2009, financing activities provided $37,127 as compared to net cash used of $174,677 in financing activities in the period ended June 30, 2008. The change was mainly a result of proceeds received from the issue of a convertible debenture in continuing operations and a related party note payable in discontinued operations versus the paydown of debt in discontinued operations in the prior year period. Accounts receivable balances at June 30, 2009 and 2008, have been reclassified in the current presentation to "current assets of discontinued operations" on our balance sheets. The parent company depends on revenues and accounts receivable collections by discontinued operations to fund the administration of the parent company pending completion of the merger with Integrated Freight. Therefore the elevated levels of aged accounts receivable we experience periodically, coupled with the need to finance activities with cash from discontinued operations, places cash flow constraints on the Company requiring it to very closely manage its expenses and payables. From time to time we have also borrowed funds from officers and employees to meet working capital needs. 16 Capital Resources On January 14, 2009, PlanGraphics, Inc., entered into a business loan in the amount of $30,000 with the holder of all of the outstanding Series A Preferred Stock of PlanGraphics, Nutmeg/Fortuna Fund LLLP (the "Holder"), in the form of a convertible debenture ("the Debenture"). The Debenture provides for an interest rate of 6% per annum with a maturity date of February 28, 2009. Proceeds of the Debenture were applied to certain critical working capital needs. The Debenture will be, in the event of default, convertible into common stock of the Company if the default is not timely cured. The Debenture will be convertible in whole or in part at a conversion price on the date of conversion at the lesser of $0.002 per share or fifty percent (50%) of the average closing price for the common stock on the five trading days immediately prior to the conversion date. Conversion of the Debenture into common stock of the registrant is limited and the Holder or its affiliates, according to the terms of the Debenture agreement, may not be the beneficial owner of more than 4.99% of the total number of shares of the Company's common stock outstanding immediately after giving effect to the issuance of shares permitted upon conversion by the Holder. Upon not less than 61 days notice to the Company, the Holder may increase or decrease this limitation. The issue of the Debenture was reported on Form 8-K filed with the SEC January 21, 2009. As of March 1, 2009, the Company is in default with regard to the terms of the Debenture, and the Holder has the right to require the Company to convert the amounts owing under the Debenture to common stock. While we had a workable factoring arrangement and we have previously raised funds from the sale of redeemable preferred stock and the issue of a convertible debenture, our operations have continued to be severely impacted by liquidity issues and the contracting US economy during this reporting period; we expect that to continue through the end of calendar year 2009. The backlog and assignments as of June 30, 2009, for our discontinued operations amount to approximately $527,309, of which approximately $464,000 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 some assignments as an outcome of declining client budgets and an overall reduction of project opportunities in the current recessionary business environment. Congress recently passed the American Recovery and Reinvestment Act of 2009 ("the Bill") which is intended to inject about $800 billion into the United States' economy. While it is premature to predict exactly how the passage of the Bill may impact the spending patterns of state and local governments, particularly in the IT and GIS arenas, passage of the Bill and implementation of its programs is expected to have a positive effect on our operating subsidiary's primary customers' capacity to restore funding to existing long-term contracts and to develop and fund new projects for which our services would be required. Tangible evidence of expanded purchasing by our traditional customer base has yet to be established and the prospects for maintaining even the status quo appear to be quite limited. Results of Operations Results of operations for the three months ended June 30, 2009 Revenues With the reclassification assigning financial results to continuing operations and discontinued operations we are not reporting revenue here because none is generated by our continuing operations. Costs and Expenses -Continuing Operations Total costs and expenses for the quarter ended June 30, 2009 amounted to $61,300, a $9,090 increase over the $52,210, for the quarter ended June 30, 2008. This 17% increase is primarily due to increased general and administrative costs. Salaries and benefits decreased by approximately $3,517, or 19%, as a result management's decision to reduce the work week to 32 hours pending receipt of new contracts. General and administrative expenses increased $12,607, or 37%, primarily as a result of increased legal costs related to the pending merger transaction. 17 Operating Loss from Continued Operations We reported an operating loss from continuing operations of $61,300 for the quarter ended June 30, 2009, as compared to an operating loss of $52,210 in the prior year. This decrease is primarily attributable to increased general and administrative costs. Interest expense increased $3,241, or 90%, from the prior year period as a result of dividend expense accrual terminating when we redeemed the Series A Preferred Stock and accrued dividends with the issue of common stock. Loss from continuing operations increased $1,977, or 3%, as a result of the above. Discontinued operations experienced an increase in operating losses of $119,656, or 411%, primarily as a result of a $512,695 decrease in revenues; the $393,039 decrease in total costs and expenses was insufficient to offset the decrease in revenues. Other income and expense from discontinued operations experienced a decrease of $19,493 from the prior year period resulting in a loss from discontinued operations of $152,074. The Company is reporting a net loss of $221,220 for the current year period compared with the prior year period's loss of $79,894. The $141,326 increase in net loss stems primarily from reduced revenue in discontinued operations and from the other items noted above. Results of operations for the nine months ended June 30, 2009 Revenues As noted above, our continuing operations do not generate revenue and, accordingly, we are not reporting revenues. Costs and Expenses from Continuing Operations Total costs and expenses for the nine months ended June 30, 2009, amounted to $149,552, a $5,329 reduction from $154,881 for the same period ended June 30, 2008. This 3% decrease is primarily due reductions in salaries and benefits. Salaries and benefits decreased by $5,868, or 11% as a result of the decision to change to a four day workweek. General and administrative expenses increased by $994 primarily as a result of increased legal fees related to the pending merger transaction; and, finally, marketing expense decreased $455. Operating loss from continuing operations decreased $5,329, or 3%, as a result of the above items. Interest expense amounted to $38,307 in the current nine month period compared with $45,041 during the same period of the prior year; the decrease of $6,734, or 15%, occurred because the redemption of outstanding preferred stock caused further accrual of related dividends to cease. Loss from continuing operations amounted to $187,859 in the current year period compared to $199, 922 in the prior year. The 6% decrease resulted from the items noted above. Discontinued operations incurred an operating loss of $289,194 in the current period versus an operating loss of $86,436 in the prior year period. The $202,758 increase resulted primarily from a decrease of $1,373,087 in revenues; the decrease of $1,171,329 in total costs and expenses was insufficient to offset the drop in revenue. While direct contract costs decreased 56%, salaries and employee benefits decreased only 14%. Other income and expenses from discontinued operations amounted to income of $84,366 in the current year versus an expense of $2,176 in the prior year. The primary cause was income recognized from the applications of fair value accounting to certain aged payables. 18 Loss from discontinued operations for the current year amounted to $204,828 versus $88,612 in the prior year. Net loss for the Company in the current year period is $392,687 versus $288,534 in the prior year. The $104,153 increase resulted from the items noted above. Income Taxes and Deferred Tax Valuation Allowance -- FY 2009 We reported net loss of $392,687 for the nine months ended June 30, 2009. Coupled with losses in prior years, we have generated a sizeable federal tax net operating loss, or NOL, carryforward which totals approximately $20.3 million as of June 30, 2009, compared to $19.9 million at September 30, 2008. We have established a 100% valuation allowance on the net deferred tax asset arising from the loss carryforwards in excess of the deferred tax liability. The valuation allowance has been recorded as our management has not been able to determine that it is more likely than not that the deferred tax assets will be realized. As a result, no provision or benefit for federal income taxes has been recorded for the period ended June 30, 2009. Critical Accounting Policies and Estimates We do not have any updates to the Critical Accounting Policies disclosed in Item 6, Part Two of our Annual Report on Form 10-KSB for September 30, 2008 and filed with the SEC. ITEM 4. CONTROLS AND PROCEDURES Inherent limitations of Control Systems We maintain appropriate internal controls and disclosure controls, and related procedures, that are designed to ensure that financial and other information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported promptly and properly to meet the current requirements. Such controls and procedures, no matter how well designed and operated, may have inherent limitations in a cost-effective control system, and therefore misstatements due to error or fraud may occur and not be detected. See the expanded discussion in Item 8A of Part Two in our Form 10-KSB for September 30, 2008, in which we identified a number of deficiencies and material weaknesses in the Companies internal controls over financial reporting; those findings continue to exist as of the end of this reporting period. Evaluation of Disclosure Controls and Procedures Based on their most recent evaluation, which was completed as of the end of the period covered by this report, and subject to the limitations above, both the company's Chief Executive Officer and Senior Financial Officer believe that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) are effective in timely alerting management to material information required to be included in this Form 10-Q and other Exchange Act filings for timely disclosure. Evaluation of Internal Controls over Financial Reporting Our management is responsible for establishing and maintaining adequate internal control over financial reporting that includes effective accounting policies and procedures as well as staffing. We previously reported material weaknesses in internal control over financial reporting resulting from inadequate staffing due to the typical resource limitations inherent in small companies. The specific material weaknesses were identified by management as of September 30, 2008 and described in our FY 2008 Form 10-KSB for that year in Item 8A of Part II. Because we do not have the financial resources to immediately increase our accounting staff, those material weaknesses and deficiencies continue to exist as of the end of the period covered by this quarterly report. While management has concluded that we continue to have material weaknesses related to internal control over financial reporting, we have devoted a significant amount of time and resources to the analysis of the financial statements presented in this Quarterly Report on Form 10-Q for the fiscal period ended March 31, 2009. Accordingly, management believes that the financial statements included in this report fairly present in all material respects, our financial condition, results of operations and cash flows. 19 Changes in Internal Controls Based upon their most recent evaluation which was completed as of the end of the period covered by this report, and subject to the limitations above, both our Chief Executive Officer and Senior Financial Officer concluded that, except for the departure of a clerk from accounting and the financial officer from our subsidiary company, there was no significant change in our internal controls over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our independent registered public accounting firm will be required to attest to the accuracy of management's evaluation report. The requirement is effective with our fiscal year ending September 30, 2010. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. 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's operating subsidiary, PlanGraphics of Maryland. All amounts had been previously recorded in the Company's financial records. The case was moved to the U.S. District Court for the District of Colorado (case # 09-cv-0332-RPM). The Company is aggressively defending its interests and has challenged the fees sought. As a result, the Company recently entered into settlement conferences and mediation with Sanborn during July 2009. Item 1A. Risk Factors In addition to the other information set forth in this report, you should carefully consider the factors discussed under the heading "Risk Factors" in our Annual Report on Form 10-KSB filed on January 21, 2009, which could materially affect our business operations, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business operations and/or financial condition. Other any risks associated with the pending transaction with Integrated Freight as described herein and as referenced in the filing of the S-4 registration statement by Integrated Freight, There have been no material changes to our risk factors since the filing of our Form 10-KSB. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS. The Company issued 401,559,467 shares of its common stock on May 29, 2009, to Integrated Freight. The shares of Common Stock were issued in reliance on the exemption from registration provided in Section 4(2) of the Securities Act of 1933. We issued the shares in lieu of making a cash payment for redemption of our outstanding Series A Redeemable Preferred Stock and related accrued dividends. No commissions or fees were paid in connection with the redemption. The certificates representing the shares were issued with a restrictive legend. On July 16, 2009, we issued a Convertible Promissory Note in exchange for a business loan of $20,000 borrowed from an unrelated entity. The Promissory Note requires that any shares issued pursuant to the note be covered by an effective registration statement or a valid exemption to Rule 144. If neither is available, we will rely upon Section 4(2) of the Securities Act of 1933 for the issue of any shares should the Promissory Note be converted into common stock; the certificates will contain a restrictive legend. ITEM 6. EXHIBITS. (a) Exhibits: Exhibit 2.1, Form of Stock Purchase Agreement, effective May 1, 2009, by PlanGraphics, Inc. et al, and filed on page 23 of this report, Exhibit 4.1, Convertible Promissory Note dated July 16, 2009, by PlanGraphics, Inc., and filed on page 28 of this report. Exhibit 31.1, Section 302 Certification for the principal executive officer, dated May 20, 2009, and filed on page 35 of this report. 20 Exhibit 31.2, Section 302 Certification for the principal financial officer, dated May 20, 2009, and filed on page 36 of this report. Exhibit 32.1, Sarbanes-Oxley Section 906 Certification for Chief Executive Officer, dated May 20, 2009, and filed on page 37 of this report. Exhibit 32.2, Sarbanes-Oxley Section 906 Certification for principal financial officer, dated May 20, 2009, and filed on page 38, of this report. 21 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PLANGRAPHICS, INC . Dated: August 14, 2009 /S/ Fred Beisser Frederick G. Beisser Senior Vice President-Finance, Secretary & Treasurer (Principal financial and accounting officer) 22
EX-2.1 2 plang63009exh21.txt FORM OF STOCK PURCHASE AGREEMENT Exhibit 2.1 STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (the "Agreement") is entered into as of May 1, 2009, by and between PlanGraphics, Inc., a Colorado corporation having its principal place of business at 112 East Main Street, Frankfort, Kentucky, 40601 (the "Seller"), the Seller's wholly owned subsidiary, PlanGraphics, Inc., a Maryland Corporation ( "PGI MD"), John C. Antenucci whose mailing address is PO Box 1503 Frankfort, KY 40602, ("Antenucci"), Frederick G. Beisser whose residence address is 796 Tioga Trail, Parker CO 80134 ("Beisser"), Integrated Freight Systems, Inc., a Florida corporation ("Integrated"), The Nutmeg Group, LLC ("Nutmeg Group") and The Nutmeg Fortuna Fund, LLLP ("Fortuna Fund"). PREAMBLE WHEREAS, PGI MD is a wholly owned subsidiary of the Seller; WHEREAS, Fortuna Fund has reached an agreement with Integrated as set forth in an Amended and Restated Stock Purchase Agreement, Stock Purchase Incident to Change of Control (the "Integrated Transaction") (attached hereto as Exhibit "A" and made a part hereof), so that after giving effect to the Integrated Transaction and the issuance of the Seller's common stock to Integrated, Integrated will own 80.2% of the outstanding stock of the Seller; WHEREAS, the Integrated Transaction requires the Seller to transfer all of its assets except pre-paid insurance, including but not limited to the Seller's outstanding PGI-MD common stock, and liabilities except as provided herein; WHEREAS, the Seller desires to sell PGI MD to Antenucci as provided in this Agreement to accommodate the Integrated Transaction; WHEREAS, Beisser is entitled to certain benefits and compensation as a result of an Executive Employment Agreement in effect; WHEREAS, Seller has promised and Antenucci is entitled to certain benefits and compensation as a result of an Executive Employment Agreement in effect and is due from Seller accrued but unsecured amounts for deferred payments and reimbursements from the general account or assets of Seller; WHEREAS, PGI MD will agree to maintain the Seller's directors and officers liability insurance "tail policy" in effect on the date of this Agreement that covering Antenucci and Beisser without gap or lapse for the three year period commencing on the Change of Control ; NOW, THEREFORE, in consideration for the expectations of the Parties as set forth in the preamble hereto, the Parties covenant, promise and agree as follows: AGREEMENT 1. Incorporation by Reference. The preamble and exhibits attached hereto are, and each of them is, incorporated herein by this reference, as if fully stated herein. 2. Sale and purchase of PGI MD. The Seller shall sell and Antenucci shall purchase all of PGI MD's common stock (the "Shares"). In consideration for the Shares, Antenucci shall: (1) relieve Seller from its unsecured promise to make severance payments from its general account or assets and forego any claim associated with such promise pursuant to his Executive Employment Agreement, and (2) voluntarily terminate his Executive Employment Agreement at the time and in the manner to be agreed by Integrated and Antenucci. 3. Related transactions.Assuming satisfaction of the conditions set forth in Section 4, then effective upon the Closing: (a) PGI MD will release the Seller from all debts and obligations owed by the Seller to PGI MD (including any intercompany debts and obligations) in consideration for the issuance by Integrated to PGI MD of 0.875% of Integrated's (as the survivor of the merger described below) common stock, based on the Seller's total number of shares of common stock issued and outstanding immediately prior to the date hereof, and an equal number of common stock purchase warrants, exercisable for two years at a price of $0.50 per share, in each case issued by Integrated. (b) PGI MD shall assume all liabilities and obligations of the Seller as set forth in Exhibit "B" hereto, including (i) all known, unknown and contingent liabilities and obligations, and (iii) the January 14, 2009 Convertible Debenture due February 28, 2009 in the principal amount of $30,000 to the Fortuna Fund (the "Convertible Debenture") and (iii) the Seller's liabilities and obligations relating to the directors and officers liability insurance described in paragraph 3(e), below, but excluding liabilities in the amount not to exceed $28,000 in the aggregate, and shall indemnify the Seller against suit to collect, including attorney's fees and costs and the collection thereof in consideration for the Seller's bargain, sale, transfer and assignment of all of the Seller's assets, other than the Shares. (c) Antenucci shall relieve Seller from its promise to make payment of accrued but unsecured amounts of deferred payments and reimbursements from its general account or assets and forego any claims associated therewith in consideration for Integrated (i) issuing to Antenucci 0.293% of Integrated's (as the survivor of the merger described below) common stock, based on the Seller's total number of shares of common stock issued and outstanding at the date hereof, (ii) issuing to Antenucci an equal number of common stock purchase warrants, exercisable for two years at a price of $0.50 per share, and (iii) purchasing and maintaining directors and officers liability insurance pursuant to paragraph 3(e), below. (d) Beisser shall release Seller from all severance payments pursuant to his Executive Employment Agreement in consideration for Integrated (i) issuing to Beisser 0.373% of Integrated's (as the survivor of the merger described below), based on the Seller's total number of shares of common stock issued and outstanding at the date hereof, (ii) issuing to Beisser an equal number of common stock purchase warrants, exercisable for two years at a price of $0.50 per share, and (iii) purchasing and maintaining directors and officers liability insurance pursuant to paragraph 3(e), below. (e) PGI MD shall, and hereby agrees to maintain the Seller's directors and officers liability insurance "tail" policy in effect on the date of this Agreement covering Antenucci and Beisser for events occurring while they served as directors or officers of the Seller with continuous coverage without gap or lapse for the three-year period commencing on a Change of Control; provided that during such three-year period, Integrated's liability for indemnification of Antenucci or Beisser shall not exceed $125,000 per person in the aggregate, which is the amount of the deductible under the current policy; and provided further that after such three-year period PGI MD and Integrated shall have no liability to Antenucci and Beisser whatsoever to maintain directors and officers liability insurance or for indemnification under statute, the articles of incorporation, bylaws, contract or otherwise. (f) Fortuna Fund shall cancel and discharge forever the Convertible Debenture and Nutmeg Group shall terminate and release its security interests in "Collateral" as defined in the Security Agreement dated August 21, 2006 between Nutmeg Group, Antenucci and the Seller in consideration for PGI MD's agreements, as follows: (i) an obligation of PGI MD to pay an aggregate of $300,000 with simple interest at 5% per annum, with annual payments limited to 2.5% of gross revenues (less VAT, pass through direct expenses and revenues from the Xmarc line of business); and (ii) an obligation of PGI MD to pay an aggregate of $300,000 with simple interest at 5% per annum, with annual payments limited to 3.5% of gross revenues (less VAT and pass through direct expenses) from the XLOB line of business; In both cases, subject to such annual verification reasonably acceptable to the Fortuna Fund and otherwise on terms and conditions more particularly described and set forth in that certain Debenture Discharge and Payment Agreement dated the date hereof by and among Fortuna Fund, Nutmeg Group, the Seller and PGI MD. (g) Subject to the reverse stock split of the Seller's issued and outstanding common stock in a ratio of 1:244.8598, which will result in 404,961 shares issued and outstanding, and the merger of PGRA with and into Integrated, Integrated (as the survivor of the merger) shall issue (subject to registration pursuant to the Securities Act of 1933, if required) common stock purchase warrants to those stockholders of Integrated that were stockholders of record of the Seller on April 1, 2009, to purchase that number of shares of common stock equal to the number of shares that each such stockholder owns after giving effect to such reverse stock split, and such warrants shall be exercisable for two years following the date of issuance at a price of $0.50 per share. (h) Integrated shall, and hereby does, indemnify PGI MD, Antenucci and Beisser for actions and events leading to and related to this transaction and the Integrated transaction. (i) PGI MD, Antenucci and Beisser shall enter into a Lockup - Leak-out Agreement for the benefit of Integrated in the form of Exhibit "C", hereto. 2 4. Conditions to completion of sale and purchase. The following must be completed before any party named herein, whether or not a direct party hereto, shall be obligated to complete the transactions under and described in this Agreement: (a) The necessary and desirable approvals by each of the parties which each such party is required to obtain, including the approval of the stockholders of the Seller, shall have been given or obtained. (b) The United States District Court for the Northern District of Illinois shall have entered its order approving the sale of the Preferred Stock by the Fortuna Fund to Integrated. (c) The Fortuna Fund and Integrated shall have closed the sale of the Preferred Stock. (d) All statutory requirements for the valid consummation by parties hereto of the transactions contemplated by this Agreement shall have been fulfilled and all authorizations, consents and approvals required to be obtained in order to permit the consummation of the transactions contemplated hereby shall have been obtained. (e) No action, suit, or proceeding shall be pending or threatened before any court or quasi-judicial or administrative agency of any governmental authority or before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge would (i) prevent consummation of any of the transactions contemplated by this Agreement, (ii) cause any of the transactions contemplated by this Agreement to be rescinded following consummation, (iii) affect adversely the right of Antenucci to own the capital stock of PGI MD and to control PGI MD, or (iv) affect adversely the right of PGI MD to own its assets and to operate its business (and no such injunction, judgment, order, decree, ruling, or charge shall be in effect). 5. Closing. The transactions contemplated by this Agreement will be closed simultaneously herewith when the conditions identified in Section 4 have been satisfied (the "Closing"). 6. Representations and Warranties of the Seller. The Seller represents, warrants and agrees as follows: (a) The Seller has all requisite corporate power and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby; and (b) The Seller owns all of the outstanding capital stock of PGI MD, free and clear of any liens, restrictions, security interests, claims, rights of another, or encumbrances other than the rights and obligations arising under this Agreement. 7. Representations and warranties by PGI MD. PGI MD hereby represents, warrants and agrees as follows: (a) PGI MD has all requisite authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby. 8. Representations and Warranties by Antenucci and Beisser. Antenucci and Beisser, individually and not jointly, each represents, warrants and agrees for himself, as follows: (a) He has the legal competency to enter into the transactions contemplated by this Agreement as to which he is a party; and (b) Assuming satisfaction of the conditions set forth in Section 4, he does not know as of the date of this Agreement (i) of any reason why all of the transactions contemplated by this Agreement cannot be consummated on behalf of the Seller or PGI MD as planned, (ii) of any outstanding injunction, judgment, order, decree, ruling, or charge, or any action, suit, proceeding, hearing or investigation of, in, or before any court or quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or before any arbitrator, filed by one or more stockholders of the Seller, that would reasonably be expected to frustrate the transactions contemplated by this Agreement, or (iii) of any threat or claim of mismanagement, omission, malfeasance, fraud, deceit or other matter, made by one or more stockholders of the Seller against him with respect to his actions in the management of the Seller, or any reason or basis therefore or facts and circumstances that could give rise thereto, which would reasonably be expected, if successfully prosecuted against him or the Seller, to expose the Seller to damages in favor of such stockholder or stockholders or would reasonably be expected to give rise to a claim of indemnification by him against the Seller under statute, the articles of incorporation, bylaws, contract or otherwise. 3 9. Representations and Warranties by Integrated. Integrated represents, warrants and agrees as follows: (a) The Integrated has all requisite corporate power and authority to enter into and perform this Agreement and to consummate the transactions contemplated hereby; and (b) Subject to paragraph 4(c), Integrated does not know or have reason to know why all of the transactions contemplated by this Agreement cannot be consummated as planned. 10. Amendment and revocation. This Agreement may not be amended, canceled, revoked or otherwise modified except by written agreement subscribed by all of the Parties to be charged with such modification. 11. Benefit. This Agreement shall be binding upon and shall inure to the benefit of the Parties hereto and their respective partners, employees, agents, servants, heirs, administrators, executors, successors, representatives and assigns. 12. Construction and jurisdiction. This Agreement and the rights of the parties hereunder shall be governed by and construed in accordance with the laws of the State of Florida including all matters of construction, validity, performance, and enforcement and without giving effect to the principles of conflict of laws. Venue for any action brought under this Agreement shall be in the appropriate court in Manatee County, Florida. 12. Material provisions. The Parties agree and stipulate that each and every recital contained in the preamble and every term and condition contained in this Agreement is material, and that each and every recital, term and condition may be reasonably accomplished within the time limitations, and in the manner set forth in this Agreement. 14. Entire agreement. This Agreement and the agreements generally or specifically identified herein (the "Transaction Agreements") set forth the entire agreement and understanding of the Parties hereto and supersedes any and all prior agreements, arrangements and understandings related to the subject matter hereof. No understanding, promise, inducement, statement of intention, representation, warranty, covenant or condition, written or oral, express or implied, whether by statute or otherwise, has been made by any party hereto which is not embodied or to be embodied in the Transaction Documents or the written statements, certificates, or other documents delivered pursuant hereto or in connection with the transactions contemplated hereby, and no Party hereto shall be bound by or liable for any alleged understanding, promise, inducement, statement, representation, warranty, covenant or condition not so set forth. 15. Public statements and cooperation with respect to filings under the Exchange Act. No party will issue any public statement, including press releases, regarding the subject matter of this Agreement and the transaction contemplated hereby before closing, without the prior approval thereof by the other party and its counsel, except to the extent required by applicable securities laws. The Seller and Integrated shall cooperate in the preparation of reports and disclosure statements required to be filed by the Seller pursuant to the Securities Exchange Act of 1934. 16. Execution and counterparts. This Agreement may be executed in one or more counterparts, each of which when executed and delivered shall be an original, and all of which when executed shall constitute one and the same instrument. 4 IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the date first set forth above. [CORPORATE SEAL] PlanGraphics, Inc., a Colorado corporation Attest: By: _____________________________ _____________________________ John C. Antenucci, President Secretary or Assistant Secretary [CORPORATE SEAL] PlanGraphics, Inc., a Maryland corporation Attest: By: _____________________________ _____________________________ John C. Antenucci, President Secretary or Assistant Secretary _______________________________ __________________________________ John C. Antenucci, individually Frederick G. Beisser, individually Approved and agreed: The Nutmeg Fortuna Fund, LLLP By: ______________________________ Randall S. Goulding, Managing Member of the General Partner Managing Member of its General Partner The Nutmeg Group, LLC By: _______________________________ Randall S. Goulding, Managing Member Integrated Freight Systems, Inc. By: _______________________________ Paul A. Henley, President 5 EX-4.1 3 plang63009exh41.txt CONVERTIBLE PROMISSORY NOTE Exhibit 4.1 THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT OR AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED. CONVERTIBLE NOTE FOR VALUE RECEIVED, PlanGraphics, Inc., a Colorado Corporation (hereinafter called "Borrower"), hereby promises to pay to Tangiers Investors, LP, (the "Holder") or its registered assigns or successors in interest or order, without demand, the sum of twenty thousand dollars ($20,000), or the amount thereof advanced from time to time and oustanding ("Principal Amount"), with simple and unpaid interest thereon, the earlier of completion of a debt or equity transaction exceeding $5,000,000 or 6 months from closing date of July 16, 2009 (the "Maturity Date"), if not sooner paid. The obligation of the Holder to fund all or any part of this Convertible Note shall be subject to the guaranty of the Borrower's payment and performance of this Convertible Note by Integrated Freight Systems, Inc., a Florida corporation (the "Guarantor"). ARTICLE I INTEREST: AMORTIZATION 1.1. Interest Rate. Subject to Section 5.7 hereof, interest payable on this Note shall accrue at a rate per annum (the "Interest Rate") of eight percent (8%). Interest on the Principal Amount shall accrue from the date of this Note and shall be payable at maturity. . 1.2. Default Interest Rate. Following the occurrence and during the continuance of an Event of Default, which, if susceptible to cure is not cured within twenty (20) days, otherwise then from the first date of such occurrence, the annual interest rate on this Note shall (subject to Section 5.7) automatically be increased to fifteen percent (15%). ARTICLE II CONVERSION REPAYMENT 2.1. No Effective Registration. Notwithstanding anything to the contrary herein, no amount payable hereunder may be paid in shares of Common Stock by the Borrower without the Holder's consent unless (a) either (i) an effective current Registration Statement covering the shares of Common Stock to be issued in satisfaction of such obligations exists, or (ii) an exemption from registration of the Common Stock is available pursuant to Rule 144 of the 1933 Act, and (b) no Event of Default hereunder (or an event that with the passage of time or the giving of notice could become an Event of Default), exists and is continuing, unless such event or Event of Default is cured within any applicable cure period or is otherwise waived in writing by the Holder in whole or in part at the Holder's option. 2.2. Optional Redemption of Principal Amount. Provided that (i) an Event of Default or an event which with the passage of time or the giving of notice could become an Event of Default has not occurred, whether or not such Event of Default has been cured, and (ii) an effective current Registration Statement covering the shares of Common Stock to be issued upon conversion of the Notes exists, the Borrower will have the option of prepaying the outstanding Principal amount of this Note ("Optional Redemption"), in whole or in part, by paying to the Holder a sum of money equal to one hundred and twenty percent (125%) of the Principal amount to be redeemed, together with accrued but unpaid interest thereon and any and all other sums due, accrued or payable to the Holder arising under this Note or any Transaction Document through the Redemption Payment Date as defined below (the "Redemption Amount"). Borrower's election to exercise its right to prepay must be by notice in writing ("Notice of Redemption"). The Notice of Redemption shall specify the date for such Optional Redemption (the "Redemption Payment Date"), which date shall be no sooner than ten (10) days after the date of the Notice of Redemption (the "Redemption Period"). A Notice of Redemption shall not be effective with respect to any portion of the Principal Amount for which the Holder has a pending election to convert, or for conversions initiated or made by the Holder during the Redemption Period if the Redemption Period is based on thirty days prior notice. On the Redemption Payment Date, the Redemption Amount, less any portion of the Redemption Amount against which the Holder has exercised its conversion rights, shall be paid in good funds to the Holder. In the event the Borrower fails to pay the Redemption Amount on the Redemption Payment Date as set forth herein, then (i) such Notice of Redemption will be null and void, (ii) Borrower will have no right to deliver another Notice of Redemption, and (iii) Borrower's failure may be deemed by Holder to be a non-curable Event of Default. A Redemption Notice may be given only at a time a Registration Statement is effective. A Notice of Redemption may not be given nor may the Borrower effectuate a Redemption without the consent of the Holder, if at any time during the Redemption Period an Event of Default or an Event which with the passage of time or giving of notice could become an Event of Default (whether or not such Event of Default has been cured), has occurred or the Registration Statement registering the Registrable Securities is not effective each day during the Redemption Period. ARTICLE III CONVERSION RIGHTS 3.1. Holder's Conversion Rights. Subject to Section 3.2, the Holder shall have the right, but not the obligation at all times, to convert all or any portion of the then aggregate outstanding Principal Amount of this Note, into shares of Common Stock, subject to the terms and conditions set forth in this Article III at the rate of 65% of the average of the lowest three volume weighted average prices of the shares during the preceding 10 day trading period prior to conversion. The Holder may exercise such right by delivery to the Borrower of a written Notice of Conversion pursuant to Section 3.2. 3.2. Mechanics of Holder's Conversion. (a) In the event that the Holder elects to convert any amounts outstanding under this Note into Common Stock, the Holder shall give notice of such election by delivering an executed and completed notice of conversion (a "Notice of Conversion") to the Borrower, which Notice of Conversion shall provide a breakdown in reasonable detail of the Principal Amount, accrued interest and amounts being converted. The original Note is not required to be surrendered to the Borrower until all sums due under the Note have been paid. On each Conversion Date (as hereinafter defined) and in accordance with its Notice of Conversion, the Holder shall make the appropriate reduction to the Principal Amount, accrued interest and fees as entered in its records. Each date on which a Notice of Conversion is delivered or telecopied to the Borrower in accordance with the provisions hereof shall be deemed a "Conversion Date." A form of Notice of Conversion to be employed by the Holder is annexed hereto as Exhibit A. (b) Pursuant to the terms of a Notice of Conversion, the Borrower will issue instructions to the transfer agent accompanied by an opinion of counsel, if so required by the Borrower's transfer agent and shall cause the transfer agent to transmit the certificates representing the Conversion Shares to the Holder by crediting the account of the Holder's designated broker with the Depository Trust Corporation ("DTC") through its Deposit Withdrawal Agent Commission ("DWAC") system within two (2) business days after receipt by the Borrower of the Notice of Conversion (the "Delivery Date"). In the case of the exercise of the conversion rights set forth herein the conversion privilege shall be deemed to have been exercised and the Conversion Shares issuable upon such conversion shall be deemed to have been issued upon the date of receipt by the Borrower of the Notice of Conversion. The Holder shall be treated for all purposes as the record holder of such shares of Common Stock, unless the Holder provides the Borrower written instructions to the contrary. Notwithstanding the foregoing to the contrary, the Borrower or its transfer agent shall only be obligated to issue and deliver the shares to the DTC on the Holder's behalf via DWAC (or certificates free of restrictive legends) if the registration statement providing for the resale of the shares of Common Stock issuable upon the conversion of this Note is effective and the Holder has complied with all applicable securities laws in connection with the sale of the Common Stock, including, without limitation, the prospectus delivery requirements. In the event that Conversion Shares cannot be delivered to the Holder via DWAC, the Borrower shall deliver physical certificates representing the Conversion Shares by the Delivery Date. 3.4. Conversion Mechanics. (a) The number of shares of Common Stock to be issued upon each conversion of this Note pursuant to this Article III shall be determined by dividing that portion of the Principal Amount and interest and fees to be converted, if any, by the then applicable Conversion Price. 2 (b) The Conversion Price and number and kind of shares or other securities to be issued upon conversion shall be subject to adjustment from time to time upon the happening of certain events while this conversion right remains outstanding, as follows: A. Merger, Sale of Assets, etc. If the Borrower at any time shall consolidate with or merge into or sell or convey all or substantially all its assets to any other corporation, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase such number and kind of shares or other securities and property as would have been issuable or distributable on account of such consolidation, merger, sale or conveyance, upon or with respect to the securities subject to the conversion or purchase right immediately prior to such consolidation, merger, sale or conveyance. The foregoing provision shall similarly apply to successive transactions of a similar nature by any such successor or purchaser. Without limiting the generality of the foregoing, the anti-dilution provisions of this Section shall apply to such securities of such successor or purchaser after any such consolidation, merger, sale or conveyance. B. Reclassification, etc. If the Borrower at any time shall, by reclassification or otherwise, change the Common Stock into the same or a different number of securities of any class or classes, this Note, as to the unpaid principal portion thereof and accrued interest thereon, shall thereafter be deemed to evidence the right to purchase an adjusted number of such securities and kind of securities as would have been issuable as the result of such change with respect to the Common Stock immediately prior to such reclassification or other change. C. Stock Splits, Combinations and Dividends. If the shares of Common Stock are subdivided or combined into a greater or smaller number of shares of Common Stock, or if a dividend is paid on the Common Stock in shares of Common Stock, the Conversion Price shall be proportionately reduced in case of subdivision of shares or stock dividend or proportionately increased in the case of combination of shares, in each such case by the ratio which the total number of shares of Common Stock outstanding immediately after such event bears to the total number of shares of Common Stock outstanding immediately prior to such event. D. Share Issuance. If the Borrower shall issue any Common Stock (except for the Excepted Issuances), prior to the complete conversion or payment of this Note, for a consideration less than the Fixed Conversion Price that would be in effect at the time of such issue, then, and thereafter successively upon each such issuance, the Fixed Conversion Price shall be reduced to such other lower issue price. For purposes of this adjustment, the issuance of any security or debt instrument of the Borrower carrying the right to convert such security or debt instrument into Common Stock or of any warrant, right or option to purchase Common Stock shall result in an adjustment to the Fixed Conversion Price upon the issuance of the above-described security, debt instrument, warrant, right, or option and again upon the issuance of shares of Common Stock upon exercise of such conversion or purchase rights if such issuance is at a price lower than the then applicable Conversion Price. E. Planned Merger of the Borrower into the Guarantor. The planned merger of the Borrower into Integrated Freight Systems, Inc., shall not be deemed to be included in the transactions described in "A" through "D" above, as a result of the succession by operation of law of the Guarantor to the obligations and the Borrower as a result of such merger. (c) Whenever the Conversion Price is adjusted pursuant to Section 3.4(b) above, the Borrower shall promptly mail to the Holder a notice setting forth the Conversion Price after such adjustment and setting forth a statement of the facts requiring such adjustment. 3.5 Issuance of Replacement Note. Upon any partial conversion of this Note, a replacement Note containing the same date and provisions of this Note shall, at the written request of the Holder, be issued by the Borrower to the Holder for the outstanding Principal Amount of this Note and accrued interest which shall not have been converted or paid, provided Holder has surrendered an original Note to the Company. In the event that the Holder elects not to surrender a Note for reissuance upon partial payment or conversion, the Holder hereby indemnifies the Borrower against any and all loss or damage attributable to a third-party claim in an amount in excess of the actual amount then due under the Note. 3 ARTICLE IV EVENTS OF DEFAULT The occurrence of any of the following events of default ("Event of Default") shall, at the option of the Holder hereof, make all sums of principal and interest then remaining unpaid hereon and all other amounts payable hereunder immediately due and payable, upon demand, without presentment, or grace period, all of which hereby are expressly waived, except as set forth below: 4.1 Failure to Pay Principal or Interest. The Borrower fails to pay any installment of Principal Amount, interest or other sum due under this Note or any Transaction Document when due and such failure continues for a period of five (5) business days after the due date. 4.2 Breach of Covenant. The Borrower breaches any material covenant or other term or condition of this Note or Transaction Document in any material respect and such breach, if subject to cure, continues for a period of ten (10) business days after written notice to the Borrower from the Holder. 4.3 Breach of Representations and Warranties. Any material representation or warranty of the Borrower made herein or in any agreement, statement or certificate given in writing pursuant hereto or in connection herewith or therewith shall be false or misleading in any material respect as of the date made and the Closing Date. 4.4 Receiver or Trustee. The Borrower or any Subsidiary of Borrower shall make an assignment for the benefit of creditors, or apply for or consent to the appointment of a receiver or trustee for them or for a substantial part of their property or business; or such a receiver or trustee shall otherwise be appointed. 4.5 Judgments. Any money judgment, writ or similar final process shall be entered or filed against Borrower or any subsidiary of Borrower or any of their property or other assets for more than $25,000 and shall remain unvacated, unbonded or unstayed for a period of forty-five (45) days. 4.6 Non-Payment. The Borrower shall have received a notice of default, which remains uncured for a period of more than twenty (20) business days, on the payment of any one or more debts or obligations aggregating in excess of $25,000 beyond any applicable grace period; 4.7 Bankruptcy. Bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings or relief under any bankruptcy law or any law, or the issuance of any notice in relation to such event, for the relief of debtors shall be instituted by or against the Borrower or any Subsidiary of Borrower and if instituted against them are not dismissed within sixty (60) days of initiation. 4.8 Stop Trade. An SEC or judicial stop trade order or Principal Market trading suspension with respect to Borrower's Common Stock that lasts for five or more consecutive trading days. 4.9 Failure to Deliver Common Stock or Replacement Note. Borrower's failure to timely deliver Common Stock to the Holder pursuant to and in the form required by this Note, and, if requested by Borrower, a replacement Note, and such failure continues for a period of five (5) business days after the due date. 4.10 Reverse Splits. The Borrower effectuates a reverse split of its Common Stock without twenty days prior written notice to the Holder. 4.11 Cross Default. A default by the Borrower of a material term, covenant, warranty or undertaking of any Transaction Document or other agreement to which the Borrower and Holder are parties, or the occurrence of a material event of default under any such other agreement which is not cured after any required notice and/or cure period. 4.12 Failure to Complete the Planned Merger into the Guarantor. Borrower's and Guarantor's failure to complete the transactions described in a registration statement filed with the U.S. Securities and Exchange Commission, File No. 333-159721, (withdrawn) as soon as practicable following the effective date of a substantially identical registration statement to be filed by the Guarantor. 4 ARTICLE V MISCELLANEOUS 5.1 Failure or Indulgence Not Waiver. No failure or delay on the part of Holder hereof in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. All rights and remedies existing hereunder are cumulative to, and not exclusive of, any rights or remedies otherwise available. 5.2 Notices. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (i) personally served, (ii) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (iii) delivered by reputable air courier service with charges prepaid, or (iv) transmitted by hand delivery, telegram, or facsimile, addressed as set forth below or to such other address as such party shall have specified most recently by written notice. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (a) upon hand delivery or delivery by facsimile, with accurate confirmation generated by the transmitting facsimile machine, at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the second business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be: (i) If to the Corporation: John C. Antenucci PlanGraphics, Inc. 112 East Main Street Frankfort, Kentucky 40601 If to the Holder: Tangiers Investors, LP 402 W. Broadway Ste. 400 San Diego, CA 92101 If to the Guarantor: Paul A. Henley Integrated Freight Systems, Inc. 6371 Business Blvd, Suite 200 Sarasota, FL 34240 5.3 Amendment Provision. The term "Note" and all reference thereto, as used throughout this instrument, shall mean this instrument as originally executed, or if later amended or supplemented, then as so amended or supplemented. 5.4 Assignability. This Note shall be binding upon the Borrower and its successors and assigns, and shall inure to the benefit of the Holder and its successors and assigns. 5.5 Cost of Collection. If default is made in the payment of this Note, Borrower shall pay the Holder hereof reasonable costs of collection, including reasonable attorneys' fees. 5.6 Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of California, without regard to conflicts of laws principles that would resulting in the applications of the substantive laws of another jurisdiction. Any action brought by either party against the other concerning the transactions contemplated by this Agreement shall be brought only in the state courts of California or in the federal courts located in the State of California. The prevailing party shall be entitled to recover from the other party its reasonable attorney's fees and costs. In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the 5 extent that it may conflict therewith and shall be deemed modified to conform to such statute or rule of law. Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or unenforceability of any other provision of this Note. Nothing contained herein shall be deemed or operate to preclude the Holder from bringing suit or taking other legal action against the Borrower in any other jurisdiction to collect on the Borrower's obligations to Holder, to realize on any collateral or any other security for such obligations, or to enforce a judgment or other court in favor of the Holder. 5.7 Maximum Payments. Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law. In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Borrower to the Holder and thus refunded to the Borrower. 5.8. Construction. Each party acknowledges that its legal counsel participated in the preparation of this Note and, therefore, stipulates that the rule of construction that ambiguities are to be resolved against the drafting party shall not be applied in the interpretation of this Note to favor any party against the other. 5.9 Redemption. This Note may not be redeemed or called without the consent of the Holder except as described in this Note. 5.10 Shareholder Status. The Holder shall not have rights as a shareholder of the Borrower with respect to unconverted portions of this Note. However, the Holder will have the rights of a shareholder of the Borrower with respect to the Shares of Common Stock to be received after delivery by the Holder of a Conversion Notice to the Borrower. IN WITNESS WHEREOF, Borrower has caused this Note to be signed in its name by an authorized officer as of the 16th day of July, 2009. PlanGraphics, Inc. By:_________________________________________ Name: John C. Antenucci Title: Chief Executive Officer WITNESS: - ------------------------------------------------------------------------------- GUARANTY The undersigned, Integrated Freight Systems, Inc., a Florida corporation, does hereby unconditionally guarantee the payment and performance of the Borrower's obligations as set forth in the above Convertible Note, nevertheless subject to the loan by the Borrower to Integrated Freight Systems, Inc. of the proceeds advanced by the Holder from time to time to the Borrower in excess of $5,000 which the Borrower will use to partially pay the outstanding invoice due from the Borrower to Sherb & Co. Without affecting the guaranty herein provided, the Guarantor agrees to pay out of the proceeds of the loan by the Borrower to the Guarantor the sum of $_________ to PlanGraphics, Inc., a Maryland corporation, ("PGI") on the invoice due from the Guarantor to PGI. Integrated Freight Systems, Inc. By:_____________________________________ Name: Paul Henley Title: Chief Executive Officer WITNESS: - -------------------------------------------------------------------------------- 6 NOTICE OF CONVERSION - -------------------- (To be executed by the Registered Holder in order to convert the Note) The undersigned hereby elects to convert $_________ of the principal and $_________ of the interest due on the Note issued by Integrated Freight Corporation. (the "Borrower") on April ____, 2009 into Shares of Common Stock of the Borrower according to the conditions set forth in such Note, as of the date written below. Date of Conversion:_____________________________________________________________ Conversion Price:_______________________________________________________________ Number of Shares of Common Stock Beneficially Owned on the Conversion Date: Less than 5% of the outstanding Common Stock of Borrower ================================================================================ Shares To Be Delivered:_________________________________________________________ Signature:______________________________________________________________________ Print Name:_____________________________________________________________________ Address:________________________________________________________________________ ________________________________________________________________________ 7 EX-31.1 4 plang63009exh311.txt RULE 13A-14(A)/15D-14(A) CERTIFICATIONS Exhibit 31.1 SECTION 302 CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER I, John C. Antenucci, certify that: 1. I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2009, of PlanGraphics, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the 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 report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the 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 an 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(s) and I have disclosed, based on our most recent evaluation of internal control 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. Date: August 14, 2009 /s/ John C. Antenucci --------------------------------------- John C. Antenucci President and Chief Executive Officer EX-31.2 5 plang63009exh312.txt RULE 13A-14(A)/15D-14(A) CERTIFICATIONS Exhibit 31.2 SECTION 302 CERTIFICATE OF THE PRINCIPAL FINANCIAL & ACCOUNTING OFFICER I, Frederick G. Beisser, certify that 1. I have reviewed this quarterly report on Form 10-Q for the period ended June 30, 2009, of PlanGraphics, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the 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 report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the 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 an 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(s) and I have disclosed, based on our most recent evaluation of internal control 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. Date: August 14, 2009 /s/ Fred Beisser --------------------------------------- Frederick G. Beisser Senior Vice President - Finance (principal financial officer) EX-32.1 6 plang63009exh321.txt SECTION 1350 CERTIFICATIONS Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of PlanGraphics, Inc. (the "Company") on Form 10-Q for the period ended June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ John C. Antenucci - --------------------- John C. Antenucci Chief Executive Officer August 14, 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. EX-32.2 7 plang63009exh322.txt SECTION 1350 CERTIFICATIONS Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of PlanGraphics, Inc. (the "Company") on Form 10-Q for the period ended June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Fred Beisser - ----------------------------- Frederick G. Beisser Senior Vice President - Finance (principal financial officer) August 14, 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-----