-----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, LcW5/aW5JLOIoYBYHosAigVI5SVzzNu5GUKjSF376R8b3FQoWGc7uyiv6glKz9Yk n4Cj47qiAAOIsoVIvsa/kw== 0001050502-06-000002.txt : 20060104 0001050502-06-000002.hdr.sgml : 20060104 20060103182919 ACCESSION NUMBER: 0001050502-06-000002 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20041231 FILED AS OF DATE: 20060104 DATE AS OF CHANGE: 20060103 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: 06503948 BUSINESS ADDRESS: STREET 1: 112 EAST MAIN STREET STREET 2: FLOOR 1 CITY: FRANKFORT STATE: KY ZIP: 40601 BUSINESS PHONE: 502 223 1501 MAIL ADDRESS: STREET 1: 19039 E PLAZA DR STREET 2: STE 245 CITY: PARKER STATE: CO ZIP: 80134 FORMER COMPANY: FORMER CONFORMED NAME: INTEGRATED SPATIAL INFORMATION SOLUTIONS INC /CO/ DATE OF NAME CHANGE: 19981015 FORMER COMPANY: FORMER CONFORMED NAME: INTEGRATED SPATIAL INFORMATION SYSTEMS INC DATE OF NAME CHANGE: 19980710 FORMER COMPANY: FORMER CONFORMED NAME: DCX INC DATE OF NAME CHANGE: 19920703 10QSB 1 plang1204.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 December 31, 2004. OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . -------------- --------------- Commission file number 0-14273 PLANGRAPHICS, INC. ------------------ (Exact name of small business issuer as specified in its charter) COLORADO 84-0868815 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 112 East Main Street Frankfort, KY 40601 ------------------- (Address of principal executive offices) (Zip Code) Administrative Office at 19039 East Plaza Drive, Suite 245 Parker, CO 80134 (720) 851-0716 -------------- (Registrant's telephone number, including area code) ------------------------------------- (Former name, former address and former fiscal year, if changed since last report) Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [ ] No [X] Indicate by check mark whether the small business issuer is a shell company (as defined in Exchange Act Rule 12b-2) Yes [ ] No [X] Indicate by check mark whether the small business issuer is an accelerated filer (as defined in Exchange Act Rule 12b-2) Yes [ ] No [X] Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] 97,214,418 shares of common stock were outstanding as of December 30, 2005. Number of pages in this report is 20 CAUTIONARY NOTES Forward-Looking Statements. This Quarterly Report on Form 10-QSB and the information incorporated by reference may include "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended. We intend the forward-looking statements to be covered by the safe harbor provisions for forward-looking statements in these sections. All statements regarding our expected financial position and operating results, our business strategy, our financing plans and the outcome of any contingencies are forward-looking statements. These statements can sometimes be identified by our use of forward-looking words such as "may," "believe," "plan," "will," "anticipate," "estimate," "expect," "intend," and other phrases of similar meaning. Known and unknown risks, uncertainties and other factors could cause the actual results to differ materially from those contemplated by the statements. The forward-looking information is based on various factors and was derived using numerous assumptions. Forward-looking statements include, but are not limited to, statements in this Form 10-QSB regarding: o our ability to raise funds through equity and debt financing; o our ability to achieve profitable operations; o our ability to compete effectively; o the strength of our technical expertise and customer service; o the potential fluctuation of the market price of our stock; o the evolving market for global information systems; o the potential gross profit margin in information technology; and o the impact of recent accounting pronouncements. Risks. Although we believe that the expectations that we express in this report are reasonable, we cannot promise that our expectations will turn out to be correct or will be accomplished in the time frame we contemplated. Our actual results could be materially different from our expectations, including the following: o we continue to experience constrained cash flows and may not overcome the underlying reasons for the liquidity cautions included in Note B to our financial statements for the period ended September 30, 2004; o we may lose customers or fail to grow our customer base; o we may experience subcontractor work stoppages as a result of delayed payments to them; o we may not be able to sustain our current growth or to successfully integrate new customers or assets obtained through future strategic partnerships, joint ventures, mergers or acquisitions; o we may fail to compete successfully with existing and new competitors; o we may not adequately anticipate and respond to technological developments impacting information services and technology; This list is intended to identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included elsewhere in this report. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements included in our Annual Report for the period ended September 30, 2004 and filed on Form 10-KSB under the caption "Item 1. Business - Risk Factors" beginning on page 9, our other Securities and Exchange Commission filings, and our press releases. The use of pronouns "we," "us," and "our" refer to the company and its subsidiary collectively. We may refer to the investor or investors in our company as "you" or "your" in this report. 2 Index Part I Financial Information 4 Item 1. Financial Statements (Unaudited) 4 Consolidated Balance Sheet 4 Consolidated Statements of Operations 5 Consolidated Statements of Cash Flows 6 Notes to Consolidated Financial Statements 7 Item 2. Management Discussion and Analysis 10 Item 3. Controls and Procedures 13 Part II Other Information 14 Item 6. Exhibits 14 Signature Page 15 Exhibits 16 3
Part I Financial Information Item 1. Financial Statements PLANGRAPHICS, INC. CONSOLIDATED BALANCE SHEET December 31 2004 ----------- ASSETS (Unaudited) CURRENT ASSETS Cash and cash equivalents $ 91,221 Accounts receivable, net 3,247,023 Prepaid expenses and other 41,231 ------------ Total current assets 3,379,475 ------------ PROPERTY AND EQUIPMENT Land and building under capital lease - related party 1,866,667 Equipment and furniture 903,280 ------------ 2,769,947 Less accumulated depreciation and amortization 1,815,934 ------------ 954,013 ------------ OTHER ASSETS Goodwill 1,907,107 Software, for future project use, net of accumulated amortization of $48,009 271,599 Other 85,430 ------------ 2,264,136 ------------ TOTAL ASSETS $ 6,597,624 ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable - current maturities $ 637,705 Obligations under capital lease - related party, current 147,319 Accounts payable 2,440,627 Accrued payroll costs and vacations 395,701 Accrued expenses 335,557 Deferred revenue and prebillings 885,071 ------------ Total current liabilities 4,841,980 ------------ LONG-TERM LIABILITIES Long-term obligations under capital leases - related party, less current maturities 1,039,277 Notes payable, less current maturities 150,000 ------------ Total long-term liabilities 1,189,277 ------------ COMMITMENTS AND CONTINGENCIES -- ------------ TOTAL LIABILITIES 6,031,257 ------------ STOCKHOLDERS' EQUITY Convertible preferred stock, $.001 par value, 20,000,000 shares authorized, no shares issued or outstanding -- Common stock, no par value, 2,000,000,000 shares authorized, 97,214,418 shares issued and outstanding 20,688,118 Accumulated deficit (20,121,751) ------------ 566,367 ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 6,597,624 ============ See accompanying notes to unaudited consolidated financial statements 4 PLANGRAPHICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months ended December 31, 2004 2003 ------------ ------------ Revenues $ 1,759,787 $ 2,110,120 Cost of sales: Direct contract costs 1,318,394 1,342,564 Salaries and employee benefits 410,321 458,444 General and administrative expenses 210,467 195,271 Marketing expenses 40,689 49,669 Other operating expenses 74,445 71,721 ------------ ------------ Costs and expenses 2,054,316 2,117,669 ------------ ------------ Operating loss (294,529) (7,549) ------------ ------------ Other income (expense): Other income 19,429 6,504 Interest expense (54,021) (65,965) ------------ ------------ (34,592) (59,461) ------------ ------------ NET LOSS $ (329,121) $ (67,010) ============ ============ Basic and diluted loss per common share $ (0.00) $ (0.00) ------------ ------------ Weighted average number of shares of common stock outstanding 97,214,418 97,214,418 ============ ============ See accompanying notes to unaudited consolidated financial statements 5 PLANGRAPHICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months ended December 31, (Unaudited) 2004 2003 ----------- ----------- Cash flows provided by (used in) operating activities: Net loss $ (329,121) $ (67,010) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 74,445 71,721 Changes in operating assets and liabilities: Accounts receivable 156,734 (11,589) Prepaid expenses and other (13,916) (14,174) Other assets (1,540) 10,037 Accounts payable 329,049 236,538 Accrued expenses (277,919) (518,882) Deferred revenue and prebillings 338,469 160,920 ----------- ----------- Net cash provided by (used in) operating activities 276,201 (132,439) ----------- ----------- Cash flows used in investing activities: Purchases of equipment -- (2,898) Addition to software for future project use -- (28,084) ----------- ----------- Net cash used in investing activities -- (30,982) ----------- ----------- Cash flows provided by (used in) financing activities: Proceeds from debt 1,617,900 789,000 Payments on debt (1,777,319) (641,634) Proceeds from notes payable - related parties -- 20,000 Payments on notes payable - related parties (9,000) -- Payments on obligations under capital lease (36,118) (31,726) Repayment of note receivable for stock purchase -- 1,000 ----------- ----------- Net cash (used in) provided by financing activities (204,537) 136,640 ----------- ----------- Net increase (decrease) in cash 71,664 (26,781) Cash and cash equivalents at beginning of period 19,557 28,216 ----------- ----------- Cash and cash equivalents at end of period $ 91,221 $ 1,435 =========== =========== See accompanying notes to unaudited consolidated financial statements 6
PLANGRAPHICS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) Consolidated Financial Statements The summary of our significant accounting policies is incorporated by reference to our annual report of September 30, 2004, on Form 10-KSB filed with the Securities and Exchange Commission. Readers are also herewith advised to read the liquidity caution in Note B of our financial statements for the period ended September 30, 2004. The 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 a new and larger financing arrangement for accounts receivable during January 2005, our viability as a going concern is dependent upon our ability to achieve profitable operations through increased sales and the higher profit margins received from Xmarc sales. The accompanying unaudited consolidated financial statements for PlanGraphics, Inc. and its operating subsidiary in this quarterly report reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results of operations, financial position and cash flows. We believe that the disclosures are adequate to make the information presented not misleading. The results of this interim period are not necessarily indicative of the results for the full fiscal year ending September 30, 2005. Certain prior year financial statement amounts have been reclassified to conform to the current year presentation. (2) Accounts Receivable The components of accounts receivable are as follows: December 31, 2004 ---------- (unaudited) Billed $1,955,955 Unbilled 1,294,498 ---------- 3,250,453 Less allowance for doubtful accounts 3,430 ---------- Accounts receivable, net $3,247,023 We have historically received greater than 10% of annual revenues from one or more customers. For the period ended December 31, 2004, the City of New York Department of Environmental Engineering (NYDEP) accounted for 40% of revenue and international sales in the Republic of China represented 17%. In the prior year the City of New York's Department of Information Technology and Telecommunications (NYDOITT) accounted for 53% of revenue for the three-month period ended December 31, 2003. In addition, at December 31, 2004, NYDEP represented 19% of billed accounts receivable and the Italian Finance Ministry represented 10% of receivables while in the prior year period NYDOITT accounted for 50% of billed accounts receivable at December 31, 2003. New York City is the largest of our current customers and its revenues come through independent contracts, purchase orders and a NYDOITT contract vehicle which is utilized by as many different city departments within the New York City government through individual order assignments. The diversity of order assignments and variety of departments as clients diminishes the concentration of revenue and receivables in a manner not obvious from the financial description above. Deferred revenue amounted to $885,071 at December 31, 2004 and represents amounts billed in excess of amounts earned. The increased level is a result of our sales of certain software that requires future services. 7 (3) Provision for Income Taxes At the beginning of this fiscal year we had net operating loss carryforwards of $13.9 million with expirations through 2023. At December 31, 2004, the amount of the net operating loss carryforward balance is estimated at $14.2 million. Since we are unable to determine that deferred tax assets exceeding tax liabilities are more likely than not to be realized, we have recorded a valuation allowance equal to the net deferred tax assets at September 30, 2004 and at December 31, 2004. As a result, no provision or benefit for income tax has been recorded for the three months ended December 31, 2004. (4) Lease Obligations We lease various equipment as well as facilities under capital and operating leases that expire through year 2007. On May 26, 2005 we entered into an agreement in principle with the landlord for our Frankfort, Kentucky facilities pursuant to which the parties agreed to terminate the capital lease and execute an operating lease thereby reducing future lease obligations (see Subsequent Events, Note 8, below). (5) 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 December 31, 2004 and 2003, were 12,652,803 and 11,833,803, respectively. The following is a reconciliation of the number of shares used in the Basic Earnings Per Share ("EPS") and Diluted EPS computations: Quarter ended December 31, 2004 2003 ---------- ---------- Basic EPS share quantity 97,214,418 97,214,418 Effect of dilutive options and warrants* -- -- ---------- ---------- Diluted EPS share quantity 97,214,418 97,214,418 *As we incurred a net loss in the periods ended December 31, 2004 and 2003 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. We use the intrinsic value method when accounting for options issued to employees and directors in accordance and directors with Accounting Principles Board No. 25, "Accounting for Stock Issued to Employees" (APB No. 25), and related interpretations. Accordingly, we do not recognize compensation expense related to employee stock options, since options are granted at a price equal to the market price on the date of grant. SFAS No. 123, "Accounting for Stock-Based Compensation" requires the Company to provide pro forma information regarding net income and net income per share as if compensation costs for its stock option plans and other stock awards had been determined in accordance with the fair value based method prescribed in SFAS No. 123. The Company estimated the fair value of each stock award at the grant date by using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants in the quarters ended December 31, 2004 and 2003: dividend yield of 0 percent, expected volatility of 120 to 140 percent, risk-free interest rates between 2.75 and 5.5 percent, and expected option lives of one to five years for all years presented. Some options are immediately vested and others may vest after the lapse of time or depend on meeting specified performance criteria. Under the accounting provisions for SFAS No. 123, the Company's net loss and net loss per share would have been adjusted to the following unaudited pro forma amounts: 8 Three Months Ended December 31, 2004 2003 ---------- ---------- Net income (loss): As reported $ (329,121) $ (67,010) Incremental Compensation Expense $ 20,135 $ 25,336 ========== ========== Pro forma $ (349,256) $ (92,346) ========== ========== Basic income (loss) per share: As reported $ (0.00) $ (0.00) ========== ========== Pro forma $ (0.00) $ (0.00) ========== ========== Diluted income (loss) per share As reported $ (0.00) $ (0.00) ========== ========== Pro forma $ (0.00) $ (0.00) ========== ========== (6) Supplemental Cash Flow Information During the three months ended December 31, 2004, PlanGraphics paid $51,180 of interest. No payments of taxes were made. (7) Recently Issued Accounting Pronouncements SFAS 123R, "Share-Based Payment" (Revised 2004). Statement of Financial Accounting Standard No. 123 (SFAS No. 123R) was revised in December 2004. We adopted the disclosure provisions of SFAS 123 when it became effective in 1996 but, as discussed above, continue to account for stock options under APB No. 25. Currently, under an exemption written into the guidance for qualifying stock option grants with no intrinsic value on the date of grant, SFAS No. 123 requires us to present pro forma share-based compensation expense determined under the fair value approach for our stock option program in the notes to our financial statements. We expect to choose the modified prospective method of adoption of SFAS No. 123R, therefore, beginning in the first quarter of 2006, we will be required to record stock related costs in our income statement. While under current guidance we have used the Black-Scholes method to calculate pro forma compensation expense, the new guidance will also allow other methods, such as the binomial method. We are evaluating the alternative methods to value stock options and do not presently know the impact of changing our current method. SFAS No. 154 "Accounting for Changes and Error Corrections--a Replacement of APB Opinion No. 20 and FASB Statement No. 3." SFAS No. 154 was issued in June 2005 and requires retrospective application of voluntary changes in accounting principles, unless impracticable. SFAS No. 154 supersedes the guidance in APB Opinion No. 20 and SFAS No. 3; but does not change any transition provisions of existing pronouncements. Generally, elective accounting changes will no longer result in a cumulative effect of a change in accounting in the income statement, because the effects of any elective changes will be reflected as prior period adjustments to all periods presented. SFAS No. 154 will be effective beginning with our 2006 fiscal year and could affect any accounting changes that we elect to make thereafter. 9 (8) Subsequent Events New Credit Facility. Our existing $750,000 line of credit with Branch Banking & Trust expired on October 3, 2004, and we entered into a forbearance agreement with them to allow us time to locate a replacement credit facility; the forbearance agreement was extended to January 10, 2005. On January 7, 2005 we entered into a 12-month financing arrangement with K Capital Partners, Inc. ("KCap") under which KCap will purchase up to $1.5 million of accounts receivable at varying levels of discount depending on the age of the receivables at the time of collection. This agreement was subsequently modified to provide that Rockland Credit Financing LLC, a minority participant in the KCAP financing agreement, would become the lead financial institution with KCap becoming the subordinate. Letter of Intent. On October 18, 2004 we entered into a non-binding letter of intent with IceWEB, Inc. ("IWEB"), a provider of Web content management systems and tools located in Herndon, Virginia, under which we would merge with ICEW. The letter of intent has been amended from time to time. PGRA shareholders are to receive cash and ICEW common stock in exchange for PGRA common stock. Leased Facilities. During May 2005 PGI-MD reached an agreement in principle with its landlord, Capital View Development LLC regarding our leased facilities in Frankfort, Kentucky. The terms agreed to will provide for termination of the existing lease and forgiveness of approximately $49,000 in past due lease payments. The terms of the agreement in principle also provide for a new lease to be effective June 1, 2005 for approximately 10,500 square feet (rather than the 20,500 previously occupied) resulting in a reduction of future lease costs by approximately $197,000 annually from the previous lease rate. Sale of Jobview Minority Interest. Effective September 30, 2005 we sold our minority interest management units owned by us to two individuals in exchange for total payment of $198,250. Pursuant to the terms of the Agreement, we are also entitled to receive all financial distributions related to our ownership of the units for all fiscal years ending prior to January 1, 2005 and for the fiscal year ended December 31, 2005, notwithstanding the fact that we will not own the units at the end of such fiscal year. (9) Foreign Currency Translation Assets and liabilities of the Company's foreign subsidiary are translated at the rate of exchange in effect at the end of the period. Net sales and expenses are translated at the average rate of exchange for the period. All foreign currency transactions and translation adjustments were not considered material as of the end of the reporting period. ITEM 2: MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Financial Condition The following discussion of liquidity and capital resources addresses our requirements and sources as of December 31, 2004 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, 2004, appearing in our FY 2004 Form 10-KSB. Readers should take into account the liquidity caution appearing in Note B of the September 30, 2004 financial statements. The Company presently continues to encounter very constrained cash flows and is carefully managing its resources while dealing with very limited cash availability. As a result, from time to time we have experienced delays in making payments of payrolls and amounts owed to subcontractors. Cash Flow We continue to experience very constrained cash flows, primarily as a result of a major project for which we do not receive periodic progress payments, causing us to finance the resources needed with funds from operations. As a result from time to time we have delayed payrolls and payment of subcontractor invoices. As of December 31, 2004 we had a net working capital deficit of ($1,462,505) versus a net working capital deficit of ($1,168,114) at September 30, 2004. The decrease in working capital resulted from the operating losses. In the three months ended December 31, 2004, operations provided net cash of $276,201, as compared to $132,439 used by operations in the period ended December 31, 2003. This increase in cash provided was primarily a result of the increase in deferred revenue balances as certain customers paid us in advance for software requiring performance of certain services in the future. 10 Our accounts receivable at December 31, 2004 have decreased slightly by $156,734 since September 30, 2004. Notes payable with current maturities increased $159,418 from September 30, 2004 as a result of the suspension of the line of credit and the requirement for us to begin reducing the existing balance. In the period ended December 31, 2004, we did not use cash in investing activities while we used $30,982 in investing activities during the period ended December 31, 2003. Financing activities in the period ended December 31, 2004 used $204,537 as compared to net cash of $136,640 provided by financing activities in the period ended December 31, 2003. Increased payment to reduce our expired line of credit accounted for the increase. Accounts receivable balances at December 31, 2004 and 2003, include both billed receivables and work-in-process. The payment terms on accounts receivable are generally net 30 days and collections generally average 45 to 90 days after invoicing. Although we experienced some delayed collections, the typical collection period is consistent with industry experience with clients in the public sector. While this sometimes results in elevation and aging of the billed accounts receivable balance, our history reflects consistent collectibility of the receivable balances. Work-in-process represents work that has been performed but has not yet been billed. This work will be billed in accordance with milestones and other contractual provisions. The amount of unbilled revenues will vary in any given period based upon contract activity Certain delays in payment are associated with a number of factors, reflecting the financial strains of public sector organizations, typical administrative procedural matters and the general slow-down normally experienced in summer and holiday periods. Management believes that we will receive payment from all remaining sources but with some delays in timeliness. As of December 31, 2004 our billed contract accounts receivable were $1,955,955 less allowance for uncollectible accounts of $3,430. During the current quarter billed receivables in arrears greater than 60 days increased from $252,325 at September 30, 2004 to $636,042 and no client accounted for more than $123,806 at December 31, 2004. As of December 31, 2004, our number of days sales outstanding (DSO) were at approximately 166 days, comparable with 162 days a year earlier. Management believes that its net receivables are ultimately collectible or recoverable, net of certain reserves, and that aggregate allowances for doubtful accounts are adequate. The elevated levels of aged accounts receivable we experience, coupled with the need to finance a major project with cash from operations, places severe cash flow constraints on the Company requiring it to very closely manage its expenses and payables. From time to time we have also borrowed funds from officers and employees to meet working capital needs. Capital Resources On January 7, 2005 we entered into a 12-month financing arrangement with K Capital Partners, Inc. ("KCap") under which provides for KCap to purchase up to $1.5 million of accounts receivable at varying levels of discount depending on the age of the receivables at the time of collection. This new financing agreement replaced the previous asset based line of credit of February 15, 2002 with BB&T for $750,000 that was secured by the accounts receivable of PGI-MD. The BB&T line of credit expired on October 3, 2004, and we had entered into forbearance agreements with BB&T through January 10, 2005 allowing us time to locate the replacement credit facility. Subsequently, effective on February 17, 2005, KCap transferred the financing arrangement to one of its investors, Rockland, and effective on the same date, we executed an agreement with Rockland with comparable terms and conditions to KCap and paid the BB&T remaining balance in full. As of December 31, 2004, our cash and cash equivalents had increased from September 30, 2004 to $91,221. Operations Outlook While we have secured a new financing arrangement (see above) and have raised funds from the sale of our interest in Jobview, we expect that our operations will continue to be impacted by constrained cash flows through the end of calendar year 2005. We continue to believe that information technology, which includes e-solutions, spatial data management and geographic information systems or "GIS," is a global market that is rapidly evolving and becoming the basis for a myriad of new 11 applications and services to solve customer problems and create additional markets. Subsequent to the economic stress of previous years on our primary customer base, the public sector, we see continuing and increased expenditures in the service areas where we are most significantly involved. In addition, our decision to acquire certain proprietary and licensable technologies for use as middleware to spatial and non spatial databases provides both a solution vehicle for an expanded customer base, inclusive of federal and commercial sectors, and a recurring revenue stream. These solutions include emergency response, non-emergency client/constituent management systems and asset management including utility infrastructure and real property. We believe our decisions were well timed and we further believe that market will produce material additional work flow for the company in response to Homeland and commercial security needs. We believe our purchase of the XMARC intellectual property and spatial integration software components provides us with increased access to federal, state and local government clients in addition to commercial enterprises as well as revenue from maintenance of existing XMARC systems already in the field. By combining the XMARC technologies with those of other suppliers of advanced software technologies, we have developed a range of Internet based product and service offerings for use in emergency response and recovery as well as a portal to other enterprise information systems including executive dashboards. We believe our acquisition of Xmarc Limited in the United Kingdom provides us with new customers and opportunities in Europe. As of December 31, 2004, we had work backlog and assignments of approximately $15.7 million, increased slightly from the $15.4 million reported for September 30, 2004 and a decrease from $18.7 million as of December, 2003. Approximately $14.4 of the backlog at December 31, 2004 was funded versus $14.1 million at September 30, 2004. Of the $15.7 million, we expect to complete approximately $7.2 million within 12 months. More recently The Company's estimated backlog and assignments as of July 30, 2005 amounted to approximately $13.9 million of which about $10 million is funded. Revenue from the December 31, 2004 backlog and assignments will be recognized through the fiscal year ending September 30, 2007. We report backlog based on executed contracts. Assignments include contract awards where documentation is pending or task orders based on existing indefinite quantity contract vehicles. A typical contract, standard for the industry, includes terms that permit termination for convenience by either party with 30 days prior notice. As most of our orders are from existing or previous customers with whom we have a good relationship, we do not anticipate cancellation of such contracts or order assignments. We have made substantial progress in positioning ourselves as a provider of Internet-accessible data repositories and warehouses that leverage spatial data. Several of our current assignments and a material portion of our contract backlog and assignments are associated with these initiatives. Currently, we plan to grow internally through strategic alliances that enhance shareholder value. Our business alliance with Oracle Corporation has yielded multiple business prospects as has our relationship with the alert notification company Genutec Business Solutions. Further, our marketing efforts in China continue to yield results measured by increased sales to current clients and anticipated projects funded by the World Bank and a number of alliances and business partner arrangements that have been consummated. Results of Operations Results of Operations for the Quarter Ended December 31, 2004 Revenues Our revenues decreased $350,333 or 17% from $2,110,120 for the quarter ended December 31, 2003 to $1,759,787 for the quarter ended December 31, 2004. This decrease was caused by the winding down of certain projects, while other projects are just beginning and new work with clients using Xmarc and Steps has not yet been authorized to begin or was at low levels of activity. Concurrently, we are also changing our revenue blend to include higher margin software licenses and maintenance revenue to complement our existing professional services activities which will allow us, over time, to improve gross margins with lower gross revenue. Deferred revenue increased $338,469 from the beginning of fiscal year balance of $546,602 as a result of software sales for which certain services will be performed in the future. We expect the deferred revenue to be earned and recorded as revenue during the ensuing quarters. 12 Costs and Expenses Total costs and expenses for the quarter ended December 31, 2004 amounted to $2,054,316, a slight decrease of $63,353 compared to $2,117,669 for the quarter ended December 31, 2003. This 3% decrease trails behind the 17% decrease in revenue for the period. Direct contract costs decreased $24,170 or 2%. Salaries and benefits decreased by approximately $48,123 because of reductions in staff related to the decrease in revenue. General and administrative expenses increased by $15,196, or 8% resulting from increased overhead expenses related primarily to increases in audit, bank and late fees and rent. Marketing expense decreased $8,980, or 18%, caused primarily by a shift of business development activities in conjunction with our business partners and by the need to reduce demand on cash. The decreases occurred primarily in $10,000 of professional fees and $8,000 in travel related costs offset by increases of $3,287 in conference expenses and $7,901 in proposal expenses. Finally, other operating costs increased by $2,724 or 4% primarily as a result of amortization of Xmarc technologies purchased June 30, 2003. Net loss Our operating loss for the quarter ended December 31, 2004 amounted to $294,529 versus the prior year operating loss of $7,549. The change is a result of decreased revenues during the current quarter. Interest expense amounted to $54,021 in the current quarter and compares favorably with $65,965 during the same period of the prior year. Other income increased from the prior year total by $12,925 as a result of Xmarc royalty income and commissions from our in-house travel reservation agent activities. We incurred a net loss of $329,121 for the quarter ended December 31, 2004 as compared to a net loss of $67,010 for the prior year period. The impacts noted above account for the change in performance. Income Taxes and Deferred Tax Valuation Allowance -- FY 2005 We have net operating loss carryforwards of approximately $14.2 million as of December 31, 2004 versus $13.9 million at September 30, 2004. We have established a 100% valuation allowance on the net deferred tax asset arising from the loss carryforwards in excess of the deferred tax liability. The valuation allowance has been recorded, as our management has not been able to determine that it is more likely than not that the deferred tax assets will be realized. As a result, no provision or benefit for federal income taxes has been recorded for the three months ended December 31, 2004. Critical Accounting Policies and Estimates We do not have any updates to the Critical Accounting Policies disclosed in Item 6, Part Two of our Annual Report on Form 10-KSB for September 30, 2003 and filed with the SEC. ITEM 3. CONTROLS AND PROCEDURES Inherent limitations of Control Systems We maintain appropriate internal controls and disclosure controls, and related procedures, that are designed to ensure that financial and other information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported promptly and properly to meet the current requirements. Such controls and procedures, no matter how well designed and operated, may have inherent limitations in a cost-effective control system, and therefore misstatements due to error or fraud may occur and not be detected. See the expanded discussion in Item 14 of Part Two in our Form 10-KSB for September 30, 2003. 13 Evaluation of Disclosure Controls and Procedures Based on their most recent evaluation, which was completed as of the end of the period covered by this report, and subject to the limitations above, both the company's Chief Executive Officer and Senior Financial Officer believe that our disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) are effective in timely alerting management to material information required to be included in this Form 10-QSB and other Exchange Act filings. Changes in Internal Controls Based upon their most recent evaluation which was completed as of the end of the period covered by this report, and subject to the limitations above, both our Chief Executive Officer and Senior Financial Officer believe that, other than as described below, there were no significant changes in our internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any significant deficiencies or material weaknesses of internal controls that would require corrective action. In response to certain internal control deficiencies noted during the year end audit process for our September 30, 2003 annual report, we made the following changes in our internal controls: o We changed our procedures to insure that agreements are reviewed by accounting and financial staff for application of generally accepted accounting principles prior to execution and that such review is documented. o We added a requirement to our periodic closeout procedures checklist for the accounting department that prompts personnel to review record balances for potential journal entries needed for non-routine accounts. As of the date of filing this Form 10-QSB, we have begun the extensive process of documenting and evaluating our internal control procedures in order to satisfy the requirements of Section 404 of the Sarbanes-Oxley Act for fiscal year 2005. Section 404 requires an annual management report of the effectiveness of our internal controls over financial reporting and that our independent registered public accounting firm attest to the accuracy of management's evaluation report. PART II- OTHER INFORMATION ITEM 6. EXHIBITS. (a) Exhibits: Exhibit 31.1,Section 302 Certification for the principal executive officer, dated December 30, 2005, and filed on page 15 of this report. Exhibit 31.2, Section 302 Certification for the principal financial officer, dated December 30, 2005, and filed on page 16 of this report. Exhibit 32.1, Sarbanes-Oxley Section 906 Certification for Chief Executive Officer, dated December 30, 2005 and filed on page 17 of this report. Exhibit 32.2, Sarbanes-Oxley Section 906 Certification for principal financial officer, dated December 30, 2005 and filed on page 18 of this report. 14 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PLANGRAPHICS, INC. Dated: December 30, 2005 /S/ Fred Beisser ---------------- Frederick G. Beisser Senior Vice President-Finance, Secretary & Treasurer (Principal financial officer) 15 EX-31.1 2 plang120431-1.txt CERTIFICATION Exhibit 31.1 SECTION 302 CERTIFICATE OF THE CHIEF EXECUTIVE OFFICER I, John C. Antenucci, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of PlanGraphics, Inc. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statemens, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date. 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 30, 2005 /s/ John C. Antenucci ----------------------------------- John C. Antenucci President and Chief Executive Officer EX-31.2 3 plang120431-2.txt CERTIFICATION Exhibit 31.2 SECTION 302 CERTIFICATE OF THE PRINCIPAL FINANCIAL & ACCOUNTING OFFICER I, Frederick G. Beisser, certify that: 1. I have reviewed this quarterly report on Form 10-QSB of PlanGraphics, Inc. 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date. 5. The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: December 30, 2005 /s/ Fred Beisser ----------------------------------- Frederick G. Beisser Senior Vice President - Finance (principal financial officer) EX-32.1 4 plang120432-1.txt CERTIFICATION Exhibit 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of PlanGraphics, Inc. (the "Company") on Form 10-QSB for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ John C. Antenucci - --------------------- John C. Antenucci Chief Executive Officer December 30, 2005 EX-32.2 5 plang120432-2.txt CERTIFICATION Exhibit 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of PlanGraphics, Inc. (the "Company") on Form 10-QSB for the period ending December 31, 2004 as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I certify, pursuant to 18 U.S.C. ss. 1350, as adopted pursuant to ss. 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Fred Beisser - ---------------------- Frederick G. Beisser Senior Vice President - Finance (principal financial officer) December 30, 2005 -----END PRIVACY-ENHANCED MESSAGE-----