-----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, Jkp21FLMnUJ9sHsK1uFST13RYw6FhKVwg39XQ6kLDsekX+WOvYN3qX+Hrn8SXijq zSYyDyWPjNTIbQs/fSQn6Q== 0001050502-02-000623.txt : 20020814 0001050502-02-000623.hdr.sgml : 20020814 20020814175420 ACCESSION NUMBER: 0001050502-02-000623 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020630 FILED AS OF DATE: 20020814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLANGRAPHICS INC CENTRAL INDEX KEY: 0000783284 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 840868815 STATE OF INCORPORATION: CO FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14273 FILM NUMBER: 02737523 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: DCX INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: DOUGLAS COUNTY INDUSTRIES INC DATE OF NAME CHANGE: 19860109 FORMER COMPANY: FORMER CONFORMED NAME: INTEGRATED SPATIAL INFORMATION SYSTEMS INC DATE OF NAME CHANGE: 19980710 FORMER COMPANY: FORMER CONFORMED NAME: INTEGRATED SPATIAL INFORMATION SOLUTIONS INC /CO/ DATE OF NAME CHANGE: 19981015 10QSB 1 plangraphics602.txt 10QSB UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2002. 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 registrant as specified in its charter) COLORADO 84-0868815 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 112 East Main Street Frankfort, KY 40601 ------------------- (Address of principal executive offices) (Zip Code) Administrative Office at 19039 East Plaza Drive, Suite 245 Parker, CO 80134 (720) 851-0716 -------------- (Registrant's telephone number, including area code) ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. [X] Yes [ ] No 97,176,539 Shares of common stock were outstanding as of August 14, 2002. Number of pages in this report is 19. CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS This Quarterly Report on Form 10-QSB and the information incorporated by reference may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and the outcome of any contingencies are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as "may," "believe," "plan," "will," "anticipate," "estimate," "expect," "intend," and other phrases of similar meaning. Known and unknown risks, uncertainties and other factors could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and was derived using numerous assumptions. Forward-looking statements include, but are not limited to, statements in this Form 10-QSB regarding: o our ability to compete effectively; o the strength of our technical expertise and customer service; o our acquisition strategy; o the potential fluctuation of the market price of our stock; o our ability to raise funds through equity and debt financing; o the evolving market for global information systems; o the potential gross profit margin in information technology; o the impact of recent accounting pronouncements. Although we believe that the expectations that we expressed in these forward-looking statements are reasonable, we cannot promise that our expectations will turn out to be correct or will be accomplished in the time frame we contemplated. Our actual results could be materially different from our expectations, including the following: o we may lose customers or fail to grow our customer base; o we may not be able to sustain our current growth or to successfully integrate new customers or assets obtained through future acquisitions; o we may fail to compete successfully with existing and new competitors; o we may not adequately anticipate and respond to technological developments impacting information services and technology; This list is intended to identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included elsewhere in this report. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements included in our Annual Report for the period ended September 30, 2001 and filed on Form 10-KSB under the caption "Item 1. Business - Risk Factors" beginning on page 7, our other Securities and Exchange Commission filings, and our press releases. The use of pronouns "we," "us," and "our" refer to the company and its subsidiary collectively. We may refer to the investor or investors in our company as "you" or "your" in this report. 2 Table of Contents Cautionary Note About Forward-Looking Statements 2 Part I Financial Information 4 Item 1. Financial Statements 4 Condensed and Consolidated Balance Sheets 4 Condensed and Consolidated Statements of Operations 6 Condensed and Consolidated Statements of Cash Flow 7 Notes to Condensed and Consolidated Financial Statements 8 Item 2. Management Discussion and Analysis 12 Part II Other Information 16 Legal Proceedings 16 Exhibit Index 17 Signature Page 17 Exhibits 18 3
Part I Financial Information Item 1. Financial Statements PLANGRAPHICS, INC. Condensed and Consolidated Balance Sheets June 30 September 30 2002 2001 ----------- ----------- (Unaudited) (Audited) Assets Current: Cash and cash equivalents $ 212,262 $ 18,799 Accounts receivable (net of allowance for doubtful accounts of $16,754 and $12,754) 3,101,808 2,134,739 Prepaid expenses and other 110,407 123,144 ----------- ----------- Total current assets 3,424,477 2,276,682 ----------- ----------- Property and Equipment: Land and building under capital lease - related party 1,866,667 1,866,667 Equipment and furniture 824,914 710,054 Other leased assets 255,602 255,600 ----------- ----------- 2,947,183 2,832,321 Less accumulated depreciation and amortization (1,542,011) (1,372,613) ----------- ----------- Net property and equipment 1,405,172 1,459,708 ----------- ----------- Other Assets: Goodwill, net of accumulated amortization 3,948,343 3,948,343 Other 108,489 101,959 ----------- ----------- Total other assets 4,056,832 4,050,302 ----------- ----------- $ 8,886,481 $ 7,786,692 ----------- ----------- See accompanying notes to financial statements 4 PLANGRAPHICS, INC. Condensed and Consolidated Balance Sheets June 30 September 30 2002 2001 ------------ ------------ (Unaudited) (Audited) Liabilities and Stockholders' Equity Current: Notes payable - current maturities $ 713,602 $ 788,780 Obligations under capital leases - related party - current 113,368 102,263 Checks written against future deposits -- 24,100 Accounts payable 801,455 1,406,455 Accrued payroll costs and vacation 408,375 428,438 Accrued expenses 299,375 387,265 Accrued litigation costs -- 358,344 Deferred revenue 400,306 181,575 ------------ ------------ Total current liabilities 2,736,481 3,677,220 ------------ ------------ Long-term Liabilities: Obligations under capital leases - related party 1,386,744 1,609,955 ------------ ------------ Total liabilities 4,123,225 5,287,175 ------------ ------------ Commitments and Contingencies: Stockholders' Equity: Cumulative convertible preferred stock, $.001 par value, 20,000,000 shares authorized, none outstanding -- -- Common stock, no par value, 2,000,000,000 shares authorized, 97,176,539 and 19,649,539 shares issued and outstanding at June 30, 2002 and September 30, 2001, respectively 20,507,466 18,103,781 Accumulated deficit (15,744,210) (15,604,264) ------------ ------------ Total stockholders' equity 4,763,256 2,499,517 ------------ ------------ $ 8,886,481 $ 7,786,692 ------------ ------------ See accompanying notes to financial statements 5 PLANGRAPHICS, INC. Condensed and Consolidated Statements of Operations (Unaudited) Nine Months Ended Three Months Ended June 30, June 30, 2002 2001 2002 2001 ------------ ------------ ------------ ------------ Revenues $ 6,286,319 $ 5,590,343 $ 2,005,464 $ 2,152,315 ------------ ------------ ------------ ------------ Costs and expenses: Salaries and employee benefits 1,234,118 1,240,381 441,959 441,344 Direct contract costs 3,801,569 3,264,887 1,293,118 1,328,942 General & administrative costs 743,136 821,267 267,618 272,651 Marketing costs 176,935 161,249 64,342 57,759 Being public & corporate affairs 61,065 194,935 (14,270) 49,362 Other operating costs 178,011 479,720 67,562 156,790 ------------ ------------ ------------ ------------ Total costs and expenses 6,194,834 6,162,439 2,120,330 2,306,848 ------------ ------------ ------------ ------------ Operating income (loss) 91,485 (572,096) (114,866) (154,533) ------------ ------------ ------------ ------------ Other income (expense): Interest expense (253,308) (317,914) (79,596) (79,151) Other income 21,877 60,344 6,657 15,940 ------------ ------------ ------------ ------------ Total other expense (231,431) (257,570) (72,939) (63,211) ------------ ------------ ------------ ------------ Net loss $ (139,946) $ (829,666) $ (187,805) $ (217,744) ------------ ------------ ------------ ------------ Basic and diluted loss per common share: Basic and diluted net loss per share $ 0.00 $ (0.04) $ 0.00 $ (0.01) ------------ ------------ ------------ ------------ Weighted average shares outstanding Basic and diluted 53,125,528 19,556,525 97,076,792 19,576,525 ------------ ------------ ------------ ------------ See accompanying notes to financial statements 6
PLANGRAPHICS, INC. Condensed and Consolidated Statements of Cash Flow (Unaudited) Nine Months Ended June 30, 2002 2001 ----------- ----------- Operating Activities: Net loss $ (139,946) $ (829,666) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 171,541 478,227 Amortization of debt discount 46,250 75,000 Provision for losses on accounts receivable 4,000 (1,007) Stock options and warrants in exchange for services performed 33,527 142,400 Write off of acquisition costs -- 25,608 Changes in operating assets: Increase in accounts receivable (971,068) (551,095) Increase (decrease) in prepaid expenses (63,520) 102,927 Increase (decrease) in accounts payable (636,167) 426,071 Decrease in accrued expenses (427,297) (147,594) Increase in deferred revenue 218,731 28,772 Increase (decrease) in other assets 4,184 (9,587) ----------- ----------- Net cash used in operating activities (1,759,765) (259,944) ----------- ----------- Investing Activities: Purchase of equipment (127,719) (10,889) ----------- ----------- Net cash used in investing activities (127,719) (10,889) ----------- ----------- Financing Activities: Checks written against future deposits (24,100) 21,701 Proceeds from borrowing 1,349,999 4,656,831 Payments on debt (1,683,533) (4,561,539) Net proceeds from issuance of common stock 2,438,581 140,612 ----------- ----------- Net cash provided by financing activities 2,080,947 257,605 ----------- ----------- Net increase (decrease) in cash 193,463 (13,228) Cash and cash equivalents, beginning of period 18,799 20,306 ----------- ----------- Cash and cash equivalents, end of period $ 212,262 $ 7,078 ----------- ----------- See accompanying notes to financial statements 7 PLANGRAPHICS, INC. NOTES TO CONDENSED AND CONSOLIDATED FINANCIAL STATEMENTS (1) Condensed and Consolidated Financial Statements We have prepared the condensed and consolidated financial statements included herein without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. We believe that the disclosures are adequate to make the information presented not misleading. In the opinion of management, the accompanying unaudited condensed and consolidated financial statements contain all adjustments (consisting only of normal recurring adjustments) necessary to present fairly our consolidated financial position as of June 30, 2002, and the consolidated results of our operations and statements of cash flows for the three- and nine-month periods ended June 30, 2002 and 2001. The accounting policies we followed are set forth in the annual report of September 30, 2001, filed under our former name, Integrated Spatial Information Solutions, Inc., on Form 10-KSB and the audited consolidated financial statements in it together with the accompanying notes. The consolidated results of operations for the period ended June 30, 2002 are not necessarily indicative of the results to be expected for the full year ending September 30, 2002. Certain prior year financial statements have been restated to conform to the current year presentation. (2) Accounts Receivable The components of accounts receivable are as follows: June 30 September 30 2002 2001 ---------- ---------- unaudited audited Contract receivables: Billed $2,279,455 $1,609,294 Unbilled 839,107 538,199 ---------- ---------- 3,118,562 2,147,493 Less allowance for doubtful accounts 16,754 12,754 ---------- ---------- Accounts receivable, net $3,101,808 $2,134,739 Deferred revenue amounts were $400,306 and $181,575 at June 30, 2002 and September 30, 2001, respectively, and represents amounts billed in excess of amounts earned. We have historically received greater than 10% of annual revenues from one or more customers. The Rhode Island Department of Transportation represented 12% of revenue and the City of New York's Department of Information Technology and Telecommunications (NYDOITT) accounted for 26% of revenue for the nine month period ended June 30, 2002, compared to NYDOITT who accounted for 36% for the period ended June 30, 2001. In addition, at June 30, 2002 two customers, NYDOITT and Sechuan Urban Environment accounted for 46% and 10% of accounts receivable, respectively, compared to NYDOITT and City of Columbus, Ohio, who accounted for 36% and 12%, respectively, of accounts receivable at June 30, 2001. NYDOITT is the largest of our current customers and its revenues represent services both as a client and as a contract vehicle utilized by as many as 20 different departments within the New York City government through individual order assignments. The diversity of order assignments and variety of departments as clients diminishes the concentration of revenue and receivables in a manner not obvious from the financial reports. 8 (3) Provision for Income Taxes At the beginning of this fiscal year we had net operating loss carryforwards of $10.4 million with expirations through 2020. At June 30, 2002, the amount of the net operating loss carryforward balance is estimated at $10.5 million. We expect to incur a minimal amount of alternative minimum tax for the fiscal year. 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 excess deferred tax assets for FY 2001 and at June 30, 2002. As a result, no provision or benefit for income tax has been recorded for the three and nine months ended June 30, 2002 and 2001. (4) Litigation We settled with prejudice a claim asserted by our landlord, Capitol View Development LLC. On June 17, 2002 the Franklin Circuit Court, Division II, Kentucky dismissed with prejudice Case Number 00-CI-0095. Plaintiff in the matter, Capitol View Development LLC, owners and lessors of our facilities in Frankfort, Kentucky, alleged that they were due certain amounts from the defendants, the lessee, PlanGraphics, Inc., and its guarantor, John C. Antenucci, related to a balloon payment required upon certain financing of the property under the terms of the amended lease. Both sides executed a settlement agreement under which we paid Capitol View Development LLC a total of $183, 272. The settlement resolved a claim pending since February, 1999 that alleged a requirement for an accelerated payment of the Capital View lease related to supplemental funding of a construction loan and associated fit out expenses for the corporate headquarters in March, 1995. The settlement had the practical effect of prepaying $145,630 against the lease. The prepayment is recorded as a reduction in long term liabilities and the interest of $12,702 and legal fees of $24,940 were recorded as one time expenses (5) Lease Obligations We lease various equipment as well as facilities under capital and operating leases that expire through the year 2011 as noted in Note 6 to the Consolidated Financial Statements in Form 10-KSB for the fiscal year ended September 30, 2001. (6) Recapitalization A shareholder rights offering, described in our prospectus of October 19, 2001, was successfully completed February 1, 2002 to recapitalize the company. It resulted in total gross subscriptions of $2,686,500 and the issuance of 76,757,134 shares of free trading common stock. This dollar amount has been reduced for outstanding receivables from certain company officers (see Note 7, below) and for related capital raising costs. The proceeds have been used to reduce liabilities and for working capital. (7) Related Party Transactions On February 9, 2001, the Board of Directors approved a loan of $75,000 and we entered into a convertible promissory note payable to Human Vision LLC, an entity controlled by a director. On May 15, 2001, we borrowed an additional $40,000 from Human Vision LLC pursuant to the same terms. See Note 7 to the Consolidated Financial Statements and Loan Transactions of Item 6 in our Form 10-KSB for the fiscal year ended September 30, 2001 for more information. Both of the notes were paid in full along with accrued interest on December 3, 2001. Also on February 9, 2001,the Board approved a resolution authorizing us to provide to Human Vision LLC a security interest in the ownership of our subsidiary as collateral for providing a standby letter of credit to further collateralize an extension of our subsidiary's line of credit. See also the Loan Transaction discussion in Item 6, Management Discussion and Analysis in our Form 10-KSB for the fiscal year ended September 30, 2001. On February 15, 2002, we received a new line of credit for $750,000 from Branch Banking &Trust ("BB&T") and BB&T subsequently released the previously required standby letter of credit extended by Human Vision, L.L.C. and Human Vision, in turn, released subsidiary as collateral. 9 On February 1, 2002, two officers, Frederick G. Beisser and John C. Antenucci, borrowed $8,750 and $175,000, respectively from the company. Repayment of the notes is due by February 1, 2004. The borrowed sums were used to exercise subscription rights to purchase 250,000 and 5,000,000 shares, respectively, under our Shareholder Rights Offering that expired on the same date. The notes receivable have been recorded as a reduction to common stock. The company's Board of Directors approved the loan of funds to each of its officers as being in the company's best interest because it will provide greater incentives to continue employment and motivation to strive for the success of the company so that the value of our common stock will increase. Mr. Beisser's note is collateralized by a lien in favor of the company on his residence. Mr. Antenucci's note is collateralized by his purchased shares and we may offset any compensation, including severance, toward payment of the note if his employment ends. Both notes bear interest at a rate equal to one fourth of one percent over the interest rate PlanGraphics receives on its money market accounts. Both officers have agreed not to sell the purchased shares of stock for six months after the date of purchase. Mr. Antenucci is a minority partner in Capitol View Development LLC, the plaintiff with whom we settled a claim as described in Note 4, above and in Part II, Item I, Legal Proceedings, below. During the three months ended June 30, 2002, the company recorded an adjustment that increased earnings by $54,167 due to the cancellation of a consulting agreement with a warrant holder in February 2001. The company had inadvertently continued to accrue an expense under the agreement during fiscal year 2002. Had the cancellation been accounted for when it occurred, the company's loss for the three months ended June 30, 2002 would have been higher by the aforementioned amount, and earnings for the first two quarters of fiscal year 2002 would have been higher by $12,500 per quarter. (8) Net Income and Loss Per Common Share. Basic earnings per share includes no dilution and is computed by dividing 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 of warrants and options outstanding and exercisable at June 30, 2002 and 2001 were 8,536,645 and 7,987,576 respectively. As we incurred a net loss in the periods ended June 30, 2002 and 2001 none of our outstanding options or warrants were included in the computation of diluted earnings per share for those periods as their effect would be anti-dilutive. (9) Supplemental Cash Flow Information During the nine months ended June 30, 2002 PlanGraphics paid $253,920 in interest expense including $12,702 paid in conjunction with the settlement of a dispute with Capital View Development LLC described in Note 4, above, and Part II, Item I, Legal Proceedings, below. During the nine months ending June 30, 2001, PlanGraphics paid $225,200 in interest expense. During the nine months ended June 30, 2002 and 2001 PlanGraphics paid $4,818 and $6,770 for tax expense. (10) XMARC Revenue On January 7, 2002 we reached an agreement to license exclusive North American rights to intellectual property and spatial integration software components previously owned by Xmarc Ltd. and now held by the Swiss based investment company HPI LLC for use in the public sector and utility markets. The technology provides wireless and Internet-enabled software solutions that aid in the access of location-based information from data warehouses and repositories. We also agreed to support former Xmarc clients, work in progress and outstanding proposals in North America. This arrangement effectively gives us increased access to federal, state and local government clients in addition to commercial enterprises. We will pay HPI LLC a royalty stream for a period of 21 months ending September 30, 2003 as we receive revenue for the product licensing and maintenance, after which we will have the right to acquire in perpetuity the exclusive rights to Xmarc intellectual property and technology and all subsequent product enhancements for the North American public sector and utility markets. As of June 30, 2002, the Company had recorded approximately $385,000 in revenues related to the licensing, maintenance and professional services associated with the technology and $30,000 in royalty payments that we will pay to HPI LLC under the agreement. 10 (11) Recently Issued Accounting Pronouncements In June 2001 the Financial Accounting Standards Board ("FASB") finalized FASB Statements No. 141, Business Combinations (SFAS 141) and No. 142, Goodwill and Other Intangible Assets (SFAS 142). SFAS 141 requires the use of the purchase method of accounting and prohibits the use of the pooling-of-interests method of accounting for business combinations initiated after June 30, 2001. SFAS 141 also requires that we recognize acquired intangible assets apart from goodwill if the acquired intangible assets meet certain criteria. SFAS 141 applies to all business combinations initiated after June 30, 2001 and for purchase business combinations completed on or after July 1, 2001. It also requires, upon adoption of SFAS 142, that we reclassify the carrying amounts of intangible assets and goodwill based on the criteria in SFAS 141. SFAS 142 requires, among other things, that companies no longer amortize goodwill, but instead test goodwill for impairment at least annually. In addition, SFAS 142 requires that we identify reporting units for the purposes of assessing potential future impairments of goodwill, reassess the useful lives of other existing recognized intangible assets, and cease amortization of intangible assets with an indefinite useful life. An intangible asset with an indefinite useful life should be tested for impairment in accordance with the guidance on SFAS 142. SFAS 142 is required to be applied in fiscal years beginning after December 15, 2001 to all goodwill and other intangible assets recognized at that date, regardless of when those assets were initially recognized. SFAS 142 requires us to complete a transitional goodwill impairment test six months from the date of adoption. We are also required to reassess the useful lives of other intangible assets within the first interim quarter after adoption of SFAS 142. We accounted for our previous business combinations using the purchase method. As of June 30, 2002, the net carrying amount of goodwill is $3,948,343 (net of $1,403,136 in accumulated amortization) and other intangible assets nil. We have elected voluntary early implementation of SFAS 141 and 142 as of October 1, 2001. We recently retained an independent third party to assist with the transitional goodwill impairment test required within six months of adoption. Based upon the valuation report received from the third party dated October 1, 2001, we determined there was no impairment of goodwill. The following table reflects unaudited pro forma results of our operations, giving effect to SFAS 142 as if it were adopted on October 1, 2000: Periods ended June 30, Three Months Nine Months 2002 2001 2002 2001 - -------------------------------------------------------------------------------- Net loss, as reported $(187,805) $(217,744) $(139,946) $(829,666) Add back: amortization expense -- 90,981 -- 272,943 - -------------------------------------------------------------------------------- Pro forma net loss $(187,805) $(126,763) $(139,946) $(556,723) Basic net loss per share: As reported $ 0.00 $ (0.01) $ 0.00 $ (0.04) Pro forma $ 0.00 $ (0.01) $ 0.00 $ (0.03) Diluted net loss per share: As reported $ 0.00 $ (0.01) $ 0.00 $ (0.03) Pro forma $ 0.00 $ (0.01) $ 0.00 $ (0.01) - -------------------------------------------------------------------------------- In August 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations." SFAS No. 143 requires the fair value of a liability for an asset retirement obligation to be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. SFAS No. 143 is effective June 30, 2003 for us. We believe the adoption of this statement will have no material impact on our consolidated financial statements. In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 144 requires that those long-lived assets be measured at the lower of carrying amount or fair value, less cost to sell, whether reported in continuing operations or in discontinued operations. Therefore, discontinued operations will no longer be measured at net realizable 11 value or include amounts for operating losses that have not yet occurred. SFAS 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 and, generally, are to be applied prospectively. We believe the adoption of this statement will have no material impact on our consolidated financial statements. In June 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities." This Statement requires recording costs associated with exit or disposal activities at their fair values when a liability has been incurred. Under previous guidance, certain exit costs were accrued upon management's commitment to an exit plan, which is generally before an actual liability has been incurred. Adoption of this Statement is required with disposal activities initiated after December 31, 2002. The Company believes that the adoption of this statement will not have an effect on the Company's financial position or result of operations as the Company has not presently identified any activities to be disposed. (12) Subsequent Events On July 31, 2002 the BB&T granted a separate $100,000 line of credit to be used by the company to fund capital equipment purchases. On August 12, 2002, BB&T indicated it will provide a ninety-day $200,000 temporary addition to PlanGraphics existing credit facility. This additional funding will be made available by BB&T as a result of a guarantee by member of our Board of Directors in the form of a $200,000 compensating account balance. Management anticipates the addition to the credit line will be sufficient for the needs of the business, pending our collection of a large receivable due from one particular client. ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Condition The following discussion of liquidity and capital resources addresses our requirements and sources as of June 30, 2002 and should be read in conjunction with our Consolidated Financial Statements and the accompanying notes. Recapitalizaton Our rights offering to existing stockholders and to certain other qualified parties commenced on October 19, 2001, as part of a recapitalization plan initiated in February 2001. The offering closed on February 1, 2002 resulting in total gross subscriptions of $2,686,500. The funds received were used primarily to pay down certain notes payable, accrued expenses and accounts payable. We also utilized a portion of the proceeds from the rights offering to pay all outstanding notes and accounts payable beyond 30-day terms. The remaining funds are being used as working capital and for general operational purposes. See also Notes 1 and 13 to the financial statements in our Form 10-KSB for September 30, 2001. We have categorized below the participation in the shareholder rights offering as to sources of funds: Directors and Officers $ 720,106 Other employees 67,157 Exercise of Shareholder Rights 548,599 Standby Investors 1,350,638 ---------- Total Subscriptions $2,686,500 The shareholder rights offering has resulted in significant enhancement of our working capital position and significantly increased our working capital which now amounts to approximately $700,000 at June 30, 2002 as compared to a deficit of approximately $1.3 million at September 30, 2001. 12 Cash Flow As of June 30, 2002 we had net working capital of $687,996 as compared to a net working capital deficit of $1,400,538 at September 30, 2001 and to a $1,270,496 deficit at June 30, 2001. This significant increase in working capital resulted from our successful shareholder rights offering. In the nine months ended June 30, 2002, operations used net cash of $1,759,765, as compared to $259,944 used in operations in the period ended June 30, 2001. This increase in cash use was primarily related to the application of funds received from the shareholder rights offering to pay down liabilities, accrued expenses and accounts payable that were 30 days or more old as seen in the decreases to these accounts. Our accounts receivable at June 30, 2002 have increased $967,069 since September 30, 2001as a result of delays in payments from a principal client due to a number of factors discussed more fully below in this section. In the period ended June 30, 2002, net cash used in investing activities was $127,719 as compared to $10,889 of net cash used in investing activities in the period ended June 30, 2001. Increased equipment purchases accounted for the change. Financing activities in the period ended June 30, 2002 provided $ 2,080,947 as compared to net cash of $257,605 provided by financing activities in the period ended June 30, 2001. Cash provided by the issuance of common stock increased over the prior year by $2,297,969 accounting for most of the increase and the net use of funds from payments on and net proceeds from borrowing and payments on debt transactions increased $428,826. Historically, our accounts receivable have been more than adequate to cover our line of credit and management believes that this will continue to be the case. Accounts receivable balances at June 30, 2002 and 2001, include both billed receivables and work-in-process. The payment terms on accounts receivable are generally net 30 days and collections generally average 45 to 60 days after invoicing. The typical collection period is consistent with industry experience with clients in the public sector. While this results in an elevation and aging of the billed accounts receivable balance, our history reflects consistent collectibility of the receivable balances. Work-in-process represents work that has been performed but has not yet been billed. This work will be billed in accordance with milestones and other contractual provisions. The amount of unbilled revenues will vary in any given period based upon contract activity. As of July 31, 2002 our accounts receivable were $2,123,754 exclusive of work-in-process. Payments in arrears greater than 60 days were $1,491,741 and included 17 active clients. One principal client accounted for $1,026,434. The delays in payments are associated with a number of factors, reflecting the financial strains of public sector organizations, typical procedural matters and the general slow-down normally experienced in summer and holiday periods. The large principal client has, itself, experienced difficulties in establishing procedures and receiving funds from federal sources due to the client and arising from the September 11, 2001 World Trade Center attacks. Management believes that we will receive payment from this and other sources but with continued lags. The elevated levels of aged accounts receivable have placed severe cash flow constraints on the company requiring it to very closely manage its expenses and payables. In addition, we have begun the process to raise temporary financing through a bridge loan. BB&T has indicated it will provide a ninety-day $200,000 temporary addition to PlanGraphics regular credit facility. This additional funding will be made available by BB&T as a result of a guarantee by a PlanGraphics, Inc. member of the Board of Directors in the form of a $200,000 compensating account balance. Management anticipates the addition to the credit line will be sufficient for the needs of the business pending our collection of a large receivable due from one particular client. Accordingly, we anticipate that the resulting funds will be timely received for us to meet required cash expenditures until the aged receivables are collected, at which time we plan to liquidate the bridge loan. See also Note 12, above. Capital Resources PlanGraphics entered into the new line of credit on February 15, 2002 with BB&T for $750,000 that no longer requires the Human Vision Standby Letter of Credit. BB&T released the standby letter of credit. Accordingly, the pledge of the outstanding shares of our subsidiary to Human Vision LLC is no longer required and the certificate was returned to PlanGraphics. See also the Loan Transaction discussion in Item 6, Management Discussion and Analysis in our form 10-KSB for the fiscal year ended September 30, 2001. As of June 30, 2002, our cash and cash equivalents had increased from September 30, 2001 to $212,262 after paying down significant amounts of liabilities. 13 On July 31, 2002 the BB&T granted a separate $100,000 line of credit to be used by the company to fund capital equipment purchases. We also periodically consider the sale of our interest in Jobview.com L.L.C. The 7.9% ownership interest in Jobview.com is valued at the original investment cost of $56,400 in our books while the market value at October 1, 2001 was estimated at approximately $479,000 as noted in the recent third party valuation report. Operations Outlook We continue to believe that information technology, which includes e-solutions, spatial data management and geographic information systems or "GIS," is a global market that is rapidly evolving and becoming the basis for a myriad of new applications and services to solve customer problems and create additional markets. Despite the economic stress of our primary customer base, the public sector, we see continuing and increased expenditures in the service areas where we are most significantly involved. These include emergency response, non-emergency client/constituent management systems and asset management including utility infrastructure and real property. Our move into the federal market was well timed and we believe that market will produce material work flow for the company. As of June 30, 2002, we had work backlog and assignments of approximately $11.2 million, significantly increased from the $9.3 million reported for June 30, 2001 and an even larger increase from $9.1 million as of September 30, 2001. Of the $11.2 million, we expect to complete approximately $7.5 million within 12 months. Revenue from existing backlog and assignments will be recognized through the fiscal year ending September 30, 2003. We report backlog based on executed contracts. Assignments include contract awards where documentation is pending or task orders based on existing indefinite quantity contract vehicles. A typical contract, standard for the industry, includes terms that permit termination for convenience by either party with 30 days prior notice. As most of our orders are from existing or previous customers with whom we have a good relationship, we do not anticipate cancellation of such contracts or order assignments. On January 7, 2002 we reached an agreement to license exclusive North American rights to intellectual property and spatial integration software components previously owned by Xmarc Ltd. and now held by the Swiss based investment company HPI LLC for use in the public sector and utility markets. The technology provides wireless and Internet-enabled software solutions that aid in the access of location-based information from data warehouses and repositories. We also agreed to support former Xmarc clients, work in progress and outstanding proposals in North America. This arrangement effectively gives us increased access to federal, state and local government clients in addition to commercial enterprises. We will pay HPI LLC a royalty stream for a period of 21 months ending September 30, 2003 as we receive revenue for the product licensing and maintenance, after which we will have the right to acquire in perpetuity the exclusive rights to Xmarc intellectual property and technology and all subsequent product enhancements for the North American public sector and utility markets. As of June 30, 2002, the Company had recorded approximately $385,000 in revenues related to the licensing, maintenance and professional services associated with the technology and $30,000 in royalty payments that we will pay to HPI LLC under the agreement. Currently, we plan to grow internally, through strategic alliances and through acquisitions that enhance shareholder value. We have made substantial progress in positioning ourselves as a provider of Internet-accessible data repositories and warehouses that leverage spatial data. Several of our current assignments and a material portion of our contract backlog and assignments are associated with these initiatives. Further, our past marketing efforts in China continue to yield results measured by increased sales to current clients and anticipated projects funded by the World Bank and a number of alliances and business partner arrangements that have been consummated. In addition, PlanGraphics has taken specific steps to position ourselves for strategic alliances, joint venture opportunities and additional acquisitions including reorganizing our corporate governance and management structure and the retention of third party advisors and investment bankers. Results of Operations Nine Months of Fiscal Year 2002 Operating revenue for the nine months of FY 2002 amounted to $6,286,319 a 12% increase from $5,590,343 in the prior year, and resulted from increases in both our advisory and implementation services associated with geographic information systems. Revenues increased as a result of work initiated on accumulated backlog 14 and from priority requirements we received for clients responding to emergency management systems needing improvements and enhancements. Even though revenue increased during the nine month period, our revenue generation was adversely impacted by approximately $300,000 per month as a result of certain customers withholding notices to proceed on awarded contracts as they dealt with internal processing and approval requirements and positioned budgetary expenditures into their new fiscal year beginning July 1, 2002. We have no reason to believe that work authorizations for the contracts held in abeyance on June 30, 2002 will not be forthcoming in the near future. As of July 31, 2002, one of the notices has been received for work to commence on August 7, 2002 with a monthly positive revenue reinstatement of approximately $30,000 per month. Our total operating costs and expenses amounted to $6,194,834 or 98% of revenue, down from 110% of revenue a year ago as we better managed incurring costs and expenses. The amount of costs reflects a small increase in operating costs from the prior year period of $32,395 or 1/2%. Comparing year to year the major variances were a $536,682, or 16%, increase in direct contract costs, as expected in light of the 12% increase in revenue; offsetting reductions appeared in general & administrative expenses of $78,131 resulting from reductions in facility lease costs, accounting services expenses, acquisition costs and consulting expenses; in public and corporate affairs of $133,870 due to cancellation of a consulting agreement, described below, and reductions in audit, investment banking and shareholder communications and $301,709 in other operating costs (principally reductionof amortization expense). Reductions in these costs were a result of spending constraints implemented to better align costs with constrained revenue growth while accommodating a need for more aggressive business development and communications seen in the 10% increase in marketing costs. We had operating income of $91,485 as compared to last fiscal year's nine month operating loss of $572,096, an improvement of $663,581 or 11% measured against current year revenues. Interest expense decreased from that of the prior year by $64,606 as a result of a decrease in the average outstanding balance of our line of credit as compared to the prior year period and lower interest rates. Interest charges for the current year include a one-time charge of $12,702 related to a settlement of a dispute with Capital View Development LLC. See also Note 4 to the financial statements, above, and the discussion in Part II, Item 1, Legal Proceedings, below. Other income decreased to $21,877 from the prior year total of $60,344 principally as a result of reduced commissions received on company travel transactions reflecting industry wide reductions and elimination of commissions on airfares. We reported a net loss of $139,946 for the nine-month period as compared to a net loss of $829,666 during the comparable period in 2001, an improvement in excess of $689,000, or 11% measured against current year revenues. The marked improvement resulted principally from the increased revenue, the absence of $272,943 of goodwill amortization, concerted attention to controllable expenses and reduced interest expense. Had the previously noted delays in authorization to proceed with work on awarded contracts not occurred, revenue would have been significantly higher and we most likely would have reported net income for the period. Result of Operations for the Quarter Ended June 30, 2002 Revenues Our revenues decreased $146,851 or 7% from $2,152,315 for the quarter ended June 30, 2001 to $2,005,464 for the quarter ended June 30, 2002. This decrease was related to delays in authorizations to proceed on certain new orders and work assignments caused by customers dealing with internal processing and approval requirements and delaying new expenditures until the new fiscal year beginning July 1, 2002. As a result of the awarded contracts being temporarily held in abeyance, our revenue generation was impeded in excess of $300,000 per month throughout this quarter. We have no reason to believe that work authorizations for these contracts presently held in abeyance will not be forthcoming in the near future. Deferred revenue increased by $218,731 from the beginning of fiscal year balance in response to new orders to proceed on work that were received during the quarter. We expect the deferred revenue to be earned and recorded as revenue during the ensuing quarters. 15 Costs and Expenses The costs and expenses for the quarter ended June 30, 2002 amounted to $2,120,330, a decrease of $186,518 compared to $2,306,848 for the quarter ended June 30, 2001. This 8% decrease parallels the 7% decrease in revenue for the period. Direct contract costs decreased $35,824 or 3% following the decrease in revenue. Salaries and benefits increased nominally by approximately $615 due to staffing in anticipation of work on projects that were held in abeyance, general and administrative expenses decreased $5,033, or 2%, costs associated with being a public company decreased by $63,632 or 128% principally due to the cancellation of a consulting agreement as described in the net loss section, below, and, finally, other operating costs decreased by $89,228 or 57% due to reductions in amortization and depreciation expense. These reductions were off set negatively by the one-time charges for legal fees of $24,940. Marketing costs increased $6,583 or 11% as we expanded our marketing efforts. Net loss Our operating loss for the quarter ended June 30, 2002 was $114,866 compared to an operating loss of $154,533 for the prior year period. This loss is directly attributable to the lack of anticipated revenues noted above resulting from awarded contract work held in abeyance by certain customers and the one time charges associated with the settlement of a dispute with Capital View Development LLC although somewhat offset by management actions to control operating costs and expenses. Interest expense amounted to $79,596 in the current quarter including a one time charge of $21,696 associated with the resolution of the Capital View Development LLC dispute and compares to $79,151 during the same period of the prior year. Other income decreased from the prior year total by $9,283 as a result of reduced commissions from our in-house travel activities. During the three months ended June 30, 2002, the company recorded an adjustment that increased earnings by $54,167 due to the cancellation of a consulting agreement with a warrant holder in February 2001. The company had inadvertently continued to accrue an expense under the agreement during fiscal year 2002. Had the cancellation been accounted for when it occurred, the company's loss for the three months ended June 30, 2002 would have been higher by the aforementioned amount, and earnings for the first two quarters of fiscal year 2002 would have been higher by $12,500 per quarter. We incurred a net loss of $187,805 for the quarter ended June 30, 2002 as compared to a net loss of $217,744 for the prior year period. Income Taxes and Deferred Tax Valuation Allowance -- FY 2002 and FY 2001 We have net operating loss carryforwards of approximately $10.5 million as of June 30, 2002 versus $10.4 million at September 30, 2001 (See Note 5 to the Condensed and Consolidated Financial Statements in our Form 10-KSB for September 30, 2001). We have established a 100% valuation allowance on the net deferred tax asset arising from the loss carryforwards in excess of the deferred tax liability. The valuation allowance has been recorded, as our management has not been able to determine that it is more likely than not that the deferred tax assets will be realized. As a result, no provision or benefit for federal income taxes has been recorded for the three and nine months ended June 30, 2002 and 2001. PART II- OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS On June 17, 2002, the Franklin Circuit Court, Division II, located in the State of Kentucky, dismissed with prejudice Case Number 00-CI-0095. Plaintiff in the matter, Capitol View Development LLC, owners and lessors of our facilities in Frankfort, Kentucky, alleged that they were due certain amounts from the defendants, the lessee, PlanGraphics, Inc., and its guarantor, John C. Antenucci, related to a balloon payment required upon certain financing of the 16 property under the terms of the amended lease. Both sides executed a settlement agreement under which we paid Capitol View Development LLC a total of $183,272. See also Note 4 to the Financial Statements The claim, pending since February 1999, was based on an alleged requirement for an accelerated payment of the Capital View lease related to supplemental funding of a construction loan and associated fit-out expenses for the company's headquarters in March 1995. The settlement had the practical effect of prepaying $145,630 against the lease. The prepayment is recorded as a reduction in long-term liabilities and the interest of $12,702 and legal fees of $24,940 were recorded as one-time expenses. ITEM 6. EXHIBITS AND REPORTS ON FORM 8K. (a) Exhibits: Exhibit 99-1, Sarbanes-Oxley Certification for the principal executive officer, dated August 14, 2002 and filed on page 18 of this report. Exhibit 99-1, Sarbanes-Oxley Certification for the principal financial officer, dated August 14, 2002 and filed on page 19 of this report. (b) Reports on Form 8-K filed since the beginning of the current quarter: Form 8-K, dated April 24, 2002 and filed on May 1, 2002 reporting the name change of the company from Integrated Spatial Information Solutions, Inc. to PlanGraphics, Inc., the availability of a webcast on the internet for 60 days from April 30, 2002 of our post-shareholder meeting conference call with investors and shareholders and the information disclosed in that conference call, and the assignment of our new trading symbol, PGRA, effective May 6, 2002. 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, 2002 /S/ Fred Beisser ---------------- Frederick G. Beisser Senior Vice President-Finance, Secretary & Treasurer and Principal Financial Accounting Officer 17 Exhibit 99.1 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 ending June 30, 2002 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, 2002 18 Exhibit 99.2 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 ending June 30, 2002 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 and Principal Financial Accounting Officer August 14, 2002 19 -----END PRIVACY-ENHANCED MESSAGE-----