-----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, D+q7oFl657EEulFcKsp/uFJws28oz8oAiIBEYo5cyCHC46n80c6piKikGsAqrdcw Q3D0reSx17JnPwvqUZEVvA== 0001050502-08-000114.txt : 20080423 0001050502-08-000114.hdr.sgml : 20080423 20080423113759 ACCESSION NUMBER: 0001050502-08-000114 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20071231 FILED AS OF DATE: 20080423 DATE AS OF CHANGE: 20080423 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLANGRAPHICS INC CENTRAL INDEX KEY: 0000783284 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 840868815 STATE OF INCORPORATION: CO FISCAL YEAR END: 0906 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-14273 FILM NUMBER: 08771002 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 plang1207.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, 2007. 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 1940 South Parker Road, #533 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] 97,214,418 shares of common stock (no par value) were outstanding as of April 11, 2008. Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X] 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 availability of working capital to meet our immediate cash and liquidity needs; o our ability to raise funds through debt and equity financing; o estimates regarding our financing needs; o our prospects for growth; o our ability to reduce costs and expenses o the collectibility of our accounts receivable; o cancellation of our contracts and order assignments; o the continuation of our relationship with the City of New York and other key clients; o the increase in competition and our ability to compete effectively; o our ability to take advantage of spatial information technology markets; o the strength of our technical expertise and customer service; o the potential fluctuation of the market price of our stock; o the ability of information technology to benefit from geospatial capabilities within their technologies; o the potential gross profit margin in information technology; o the projections regarding our financial results for fiscal years ("FY") 2007 and 2008; o fluctuations in exchange rates; o the impact of recent accounting pronouncements; and o the availability and affordability of alternative lease facilities. Although we believe that the expectations that we express in these forward-looking statements are reasonable, we cannot promise that our expectations will turn out to be correct or will be accomplished in the time frame we contemplate. Our actual results could be materially different from our expectations, including the following: o We may continue to experience significant liquidity issues and may not overcome the underlying causes; o we may not be able to obtain needed financing; o we may not achieve continued profitability; o we may experience work stoppages by subcontractors due to our late payments; o we may lose customers or fail to grow our customer base; o we may fail to compete successfully with existing and new competitors; o we may not adequately anticipate and respond to technological developments impacting information services and technology; and o we may issue a substantial number of shares of our common stock upon exercise of options and warrants, thereby causing dilution in the value of your investment; This list is intended to identify some of the principal factors that could cause actual results to differ materially from those described in the forward-looking statements included elsewhere in this report. These factors are not intended to represent a complete list of all risks and uncertainties inherent in our business, and should be read in conjunction with the more detailed cautionary statements included in our Annual Report for the year ended September 30, 2007, (filed with the SEC on Form 10-KSB) under the caption "Item 1. Business - Risk Factors" beginning on page 8, and our other Securities and Exchange Commission filings, and our press releases. 2 Table of Contents Part I Financial Information 4 Item 1. Consolidated Financial Statements (Unaudited) 4 Consolidated Balance Sheet 4 Consolidated Statements of Operations 5 Consolidated Statements of Cash Flows 6 Notes to Unaudited Consolidated Financial Statements 7 Item 2. Management Discussion and Analysis 12 Item 3. Controls and Procedures 16 Part II Other Information 17 Item 1. Legal Proceedings 17 Item 6. Exhibits 17 Signature Page 18 Exhibits 19 3
Part I Financial Information Item 1. Financial Statements PLANGRAPHICS, INC. CONSOLIDATED BALANCE SHEETS December 31, 2007 September 30, 2007 ----------------- ------------------ (Unaudited) ASSETS CURRENT ASSETS Cash and cash equivalents Cash $ 7,279 $ 36,711 Restricted cash -- 41,931 ------------ ------------ 7,279 78,642 Accounts receivable, less allowance for doubtful accounts of $14,151 and $0 for December 31 and September 30, 2007, 1,232,677 1,074,944 respectively Prepaid expenses and other 31,233 30,362 ------------ ------------ Total current assets 1,271,189 1,183,948 ------------ ------------ PROPERTY AND EQUIPMENT Equipment and furniture 367,515 367,515 Less accumulated depreciation and amortization (341,824) (337,837) ------------ ------------ 25,691 29,678 ------------ ------------ OTHER ASSETS Software development costs, net of accumulated amortization $696,907 and $657,967 at December 31 and September 30, 2007, respectively 245,991 284,932 Other 10,454 10,518 ------------ ------------ 256,445 295,450 ------------ ------------ Total assets $ 1,553,325 $ 1,509,076 ============ ============ LIABILITIES AND STOCKHOLDERS' DEFICIT CURRENT LIABILITIES Mandatory redeemable Series A preferred stock, $0.001 par value, 500 shares issued and outstanding at December 31, and September 30, 2007 $ 500,000 $ 500,000 Notes payable - current maturities 162,122 182,786 Accounts payable 2,585,967 2,558,265 Accrued payroll costs 221,753 304,366 Accrued expenses 360,679 367,217 Deferred revenue and prebillings 513,563 351,974 ------------ ------------ Total current liabilities 4,344,084 4,264,608 Notes payable - long-term, less current maturities -- 34,541 ------------ ------------ Total liabilities 4,344,084 4,299,149 ------------ ------------ STOCKHOLDERS' DEFICIT Common stock, no par value, 2,000,000,000 shares authorized, 97,214,418 and 97,214,418 shares issued and outstanding 20,697,839 20,697,839 Accumulated deficit (23,488,598) (23,487,912) ------------ ------------ Total Stockholders' Deficit (2,790,759) (2,790,073) ------------ ------------ $ 1,553,325 $ 1,509,076 ============ ============ See accompanying notes to unaudited consolidated financial statements 4 PLANGRAPHICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) For the three months ended December 31, 2007 December 31, 2006 ----------------- ----------------- Revenues $ 1,033,630 $ 1,426,039 Costs and expenses Direct contract costs 530,909 759,243 Salaries and employee benefits 297,000 338,024 General and administrative expenses 133,171 144,461 Marketing expenses 2,527 6,814 Other operating expenses 57,078 63,404 ------------ ------------ Total costs and expenses 1,020,685 1,311,946 ------------ ------------ Operating income 12,945 114,093 ------------ ------------ Other income (expense): Other income 30,040 27,942 Interest expense (43,671) (53,278) ------------ ------------ (13,631) (25,336) ------------ ------------ Net income (loss) $ (686) $ 88,757 ============ ============ Basic and diluted loss per common share $ (0.00) $ 0.00 ------------ ------------ Weighted average shares of common stock outstanding - basic and diluted 97,214,418 97,214,418 ============ ============ See accompanying notes to unaudited consolidated financial statements 5 PLANGRAPHICS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) For the three months ended December 31, 2007 2006 --------- --------- Cash flows provided by (used in) operating activities: Net income (loss) $ (686) $ 88,757 Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 42,928 60,927 Allowance for doubtful accounts 14,151 1,011 Changes in operating assets and liabilities Accounts receivable (171,884) 148,539 Prepaid expenses and other (871) 18,506 Other assets 65 (1,510) Accounts payable 27,701 (68,714) Accrued expenses (89,151) (92,229) Deferred revenue and prebillings 161,589 (121,311) --------- --------- Net cash provided by (used in) operating activities (16,158) 33,976 --------- --------- Cash flows used in investing activities: Purchases of equipment -- (6,925) Software developed for future use -- (12,477) --------- --------- Net cash used in investing activities -- (19,402) --------- --------- Cash flows used in financing activities: Payments on debt (55,205) (10,000) --------- --------- Net cash used in financing activities (55,205) (10,000) --------- --------- Net increase (decrease) in cash (71,363) 4,574 Cash and cash equivalents at beginning of year 78,642 1,895 --------- --------- Cash and cash equivalents at end of year $ 7,279 $ 6,469 ========= ========= See accompanying notes to unaudited consolidated financial statements 6
PLANGRAPHICS, INC. NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (1) Consolidated Financial Statements The summary of our significant accounting policies is incorporated herein by reference to our annual report of September 30, 2007, on Form 10-KSB filed with the Securities and Exchange Commission. Readers are also herewith advised to read the going concern statement in the report of our Independent Registered Accounting Firm and also the liquidity caution in Note B in our financial statements for the period ended September 30, 2007. The accompanying unaudited consolidated financial statements in this report have been presented on the going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. While we secured an improved factoring agreement for accounts receivable during 2007, our viability as a going concern is dependent upon our ability to maintain and increase profitable operations through increased sales and the higher profit margins received from Xmarc sales. During the fiscal years of 1998 through 2007 we have experienced significant operating losses with corresponding reductions in working capital and stockholders' equity. We do not currently have any external financing in place to support operating cash flow requirements. Our revenues and backlog have also decreased substantially. To address the going concern issue, management implemented financial and operational plans to improve operating efficiencies, reduce overhead and accelerate cash from our contracts, reduce and eliminate cash losses, and position us for future profitable operations. We have reduced our general and administrative expenses by reducing occupancy costs, streamlining our executive and administrative support team, and using attrition of senior and middle management to reduce costs. The accompanying unaudited consolidated financial statements for PlanGraphics, Inc. and its operating subsidiary in this quarterly report reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the results of operations, financial position and cash flows. All significant inter-company balances and transactions have been eliminated in our consolidation. We believe that the disclosures are adequate to make the information presented not misleading. The results of this interim period are not necessarily indicative of the results for the full fiscal year ending September 30, 2008. These financial statements should be read in conjunction with the Company's financial statements and notes for the year ended September 30, 2007, included in the Company's Annual Report on Form 10-KSB. Certain prior year financial statement amounts have been reclassified to conform to the current year presentation. 7 (2) Going Concern Statement As reported in the consolidated financial statements accompanying our annual report on Form 10-KSB for the year ended September 30, 2007, the Company incurred net losses for the years ended September 30, 2007 and 2006. The Company has also suffered recurring losses, has a negative working capital position and a stockholders' deficit. As noted in the auditor's report on our September 30, 2007, financial statements, these factors raise substantial doubt about the Company's ability to continue as a going concern. For the three months ended December 31, 2007, the Company is reporting net loss of $686 and cash used in operations amounted to $16,158, decreases from the same period of the prior year. The Company has had a history of net losses over the years. These consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded assets, or the amounts and classification of liabilities that might be necessary in the event the Company cannot continue in existence. Management has taken aggressive action to reduce operating costs to the maximum extent possible and has established plans intended to increase the sales of the Company's products and services. Management intends to seek financing to provide funds needed to increase liquidity, fund growth in revenues and to implement its business plan. We intend to secure working capital through additional debt or equity financings or from the sale of certain assets. Any additional equity financing could dilute the equity interests of existing security holders. If adequate funds are not available or are not available on acceptable terms, our ability to operate our business and fund our operations could be materially and adversely affected. No assurance can be given that the Company will be able to raise any additional capital. (3) Accounts Receivable The components of contract receivable are as follows: December 31, 2007 ---------- Billed $ 848,744 Unbilled 398,084 ---------- 1,246,828 Less allowance for doubtful accounts 14,151 ---------- Accounts receivable, net $1,232,677 ========== At December 31, 2007, customers exceeding 10% of billed accounts receivable were New York City Department of Environmental Engineering (NYDEP), 46%, and Panzhihua Municipal Planning Office (China), 12%. At the same date, customers exceeding 10% of revenue for the quarter were NYDEP, 31%, San Francisco Department of Technology and Information Systems, 13%. 8 At December 31, 2006, customers exceeding 10% of billed accounts receivable were international clients in China, 12%, and the New York City Department of Environmental Engineering (NYDEP), 26%. At the same date, a sole customer exceeded 10% of revenue for the quarter, NYDEP, 49%. Billed receivables include $90,875 for the net amount of factored invoices due from Rockland. This amount is comprised of the amount of outstanding uncollected invoices on hand at Rockland ($546,460) less the net amount of funds employed by Rockland in servicing them ($455,585) which consists of actual cash advances, payments, and other reserves and fees related to the factoring agreement. Pursuant to the factoring agreement we have granted Rockland a lien and security interest in all of our cash, accounts, goods and intangibles. Billing terms are negotiated in a competitive environment and are typically based on reaching project milestones. When appropriate we establish a reserve ("allowance for doubtful accounts") for estimated uncollectible amounts of billed and unbilled accounts receivable. When we determine that the collection of a billed or unbilled account receivable related to an active contract is not probable, we reduce the contract value accordingly. When we determine that the collection of a billed or unbilled account receivable related to a completed contract is not probable, we record bad debt expense and increase the allowance for doubtful accounts. When we identify that the collection of a reserved account receivable will not be collected, we write off the account receivable and reduce the allowance for doubtful accounts. Deferred revenue amounted to $513,563 at December 31, 2007, and represents amounts billed in excess of amounts earned. These amounts are offset by work in progress which represents work completed but not yet invoiced but included in Accounts Receivable, typically pending completion of payment milestones (4) Lease Obligations We lease various equipment as well as facilities under operating leases that expire through the year 2012. (5) Stock-Based Compensation. We follow the provisions of SFAS No. 123R, Share Based Payment. SFAS No. 123R requires all share-based payments to employees, including grants of employee stock options, to be recognized in the statement of operations as compensation expense (based on their fair values) over the vesting period of the awards. Option valuation models (we use the Black-Scholes model) to estimate fair value require the input of highly subjective assumptions including the expected life of the option. Because our employee stock options have characteristics significantly different from those of traded options (which we do not have), and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of our employee stock options. We did not grant options to acquire shares of common stock during the quarters ended December 31, 2007 and 2006, respectively. There were no options exercised during the period ending December 31, 2007; accordingly, the total intrinsic value of options exercised to date during fiscal year 2008 is $0. Because we did not have any unvested options or warrants as of December 31, 2007, there was no unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the Equity Compensation Plan. 9 (6) Net Loss Per Common Share. Basic loss per share includes no dilution and is computed by dividing income or loss attributable to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per share reflects the potential dilution of securities that could share in the earnings of an entity, when appropriate. The total number of shares of common stock issuable upon exercise of warrants and options outstanding and exercisable at December 31, 2007 and 2006, were 8,447,790 and 15,174,116, respectively. 2007 2006 ---------- ---------- Options 8,447,790 11,316,904 Warrants -- 3,857,212 ---------- ---------- Total outstanding 8,447,790 15,174,116 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, 2007 2006 ---------- ---------- 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 *The closing market price of PGRA on December 31, 2006 was lower than the exercise price of all outstanding options and warrants. Because of that, we assume that none of the outstanding options or warrants at that date would have been exercised and therefore none were included in the computation of diluted earnings per share for period ended December 31, 2006. Further, for the net-loss periods we excluded any effect of outstanding options and warrants as their effect would be anti-dilutive. (7) Supplemental Cash Flow Information During the three months ended December 31, 2007, PlanGraphics paid $22,088 of interest. No payments of taxes were made. (8) 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 actual rate of exchange incurred for each transaction during the period. The total of all foreign currency transactions and translation adjustments resulted in a net gain of $17,712 during the reporting period. (9) Provision for Income Taxes At the beginning of this fiscal year we had net operating loss carryforwards of $19.1 million with expirations through 2027. At December 31, 2007, the amount of the net operating loss carryforward balance is estimated at $19.1 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, 2007 and at December 31, 2007. As a result, no provision or benefit for income tax has been recorded for the three months ended December 31, 2007. (10) Recently Issued Accounting Pronouncements In March 2008, the Financial Accounting Standards Board issued Statement No. 161, Disclosures about Derivative Instruments and Hedging Activities an amendment of FASB Statement No. 133. Statement 161 requires disclosures of how and why an entity uses derivative instruments, how derivative instruments and related hedged items are accounted for and how derivative instruments and related hedged items affect an entity's financial position, financial performance, and cash flows. Statement 161 is effective for fiscal years 10 beginning after November 15, 2008, with early adoption permitted. Because we are not involved in hedging activities and do not have derivative instruments, we do not believe the pending adoption of Statement 161 will have any effect on our consolidated financial statements. (11) Segment Information The Company follows the provisions of SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information." This statement establishes standards for the reporting of information about operating segments in annual and interim financial statements. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker(s) in deciding how to allocate resources and in assessing performance. In the opinion of management, the Company operates in one business segment, business information services, and all revenue from its services and license fees and royalties are earned in this segment. Management of the Company makes decisions about allocating resources based on this one operating segment. The Company has three geographic regions for its operations, the United States, Europe and Asia. Revenues are attributed to geographic areas based on the location of the customer. The following table depicts the geographic information expected by FAS 131: Geographic Information for the period ended December 31, Long-lived Accounts Revenues Assets Receivable -------- ------ ---------- 2007 United States $ 730,593 $ 267,294 $1,098,070 Europe 263,880 4,388 134,607 Asia 39,157 -- -- ---------- ---------- ---------- Total $1,033,630 $ 271,682 $1,232,677 2006 United States $1,158,434 $ 389,581 $1,406,686 Europe 207,032 5,811 31,751 Asia 60,573 -- -- ---------- ---------- ---------- Total $1,426,039 $ 395,392 $1,438,437 11 ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Executive Summary of PlanGraphics, Inc. PlanGraphics is a full life-cycle systems integration and implementation firm, providing a broad range of services in the design and implementation of information technology related to spatial information management in the public and commercial sectors. During FY 2007 approximately 67% of our sales were to customers in federal, state and local governments, and utilities; 22% to international customers and the remaining 11% to commercial enterprises. Our customers are located in the United States and foreign markets requiring locational or "spatial" information. The mix of customers remained comparable through the first quarter of fiscal year 2008. o We have a working capital deficit at December 31, 2007, of $3,072,895, and have had recurring net losses in all prior fiscal years back to 1998. The viability of PlanGraphics is dependent upon our ability to achieve, then maintain and increase profitability in future operations. o Management's foremost challenges are coping with limited cash flows and building a profitable business at a time when federal, state and local governments are experiencing constrained revenues and the commercial sector is, in part, negatively affected by a contracting economy. o The Company depends on internal cash flow to support operations. Internal cash flow is affected significantly by customer contract terms, delays in foreign currency transfers and our progress achieved on projects. o Management continues to carefully manage payments and from time to time has borrowed funds from officers to meet temporary working capital shortages. o Our Master Factoring Agreement with Rockland has been extended through June 30, 2008, and the required monthly volume reduced to $250,000 per month. o We have reduced our general and administrative expenses by reducing occupancy costs, constraining overhead and administrative costs and streamlining our management and production teams. o As a result of our very constrained cash flows, we sometimes delay payments to subcontractors and suppliers. From time to time, we have delayed management and employee payrolls as well as delayed payments to subcontractors and suppliers. We have also experienced the departure of certain technical employees, reduced availability of subcontractors and legal costs related to negotiating work-out agreements and settlements with creditors. o About our business: Our consulting and systems integration and implementation capabilities include business and web-enabled solutions exploiting the advanced technologies of spatial information management systems (also known as geographic information systems), data warehousing, electronic document management systems and internal and external networks. o Our contracts are often awarded as long as two to three years after we initially contact a customer. In many instances we first provide consulting services to determine an appropriate solution to a need and then we subsequently receive a larger contract. o Our consulting and implementation practice operates nationally and abroad. We are also pursuing opportunities related to executive dashboards, emergency preparedness and public safety throughout the U.S. o Our primary customer base has traditionally included state and local governments and public utilities. Recently we are experiencing a reduced number of opportunities and significantly higher sensitivity to pricing in the competitive procurements that have been available. Federal agencies where PlanGraphics has expertise are also exhibiting a more cautious approach and pace to contracting. 12 o We believe the critical factors for the future success of PlanGraphics are: o Maintaining and increasing positive cash flows from operations by controlling costs; o Securing financing arrangements to fund operations; o Changing our revenue mix to increase the amount of higher margin software sales; o Successfully meeting the challenges of an increasingly contracting economic environment; o Increasing lagging revenue through expanded lead generation and sales into a more diverse range of clientele; and o Maintaining and increasing net income. Financial Condition The following discussion of liquidity and capital resources addresses our requirements and sources as of December 31, 2007 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, 2007, appearing in our FY 2007 Form 10-KSB. Readers should take into account the auditor's going concern statement as well as the liquidity caution appearing in Note B of the September 30, 2007 financial statements. The Company presently continues to encounter liquidity issues and is carefully controlling costs and expenses while managing its resources to deal with very limited cash availability. As a result, from time to time we have experienced delays in making payments of management payrolls and amounts owed to subcontractors. Cash Flow The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. During fiscal years 1998 through 2007, we experienced significant losses with corresponding reductions in working capital and net worth, excluding the impact of certain one time gains. Our revenues and backlog have also decreased substantially during the past two years. If we are unable to maintain and increase cash flow necessary to meet our operating and capital requirements, we will be forced to restrict operating expenditures to match available resources or seek additional financing, which may be available only at unfavorable interest rates or not available at all. These factors, among others, raise substantial doubt about our ability to continue as a going concern. We continue to experience significant liquidity issues that cause us to finance the resources needed with funds from operations and accretion of amounts owed to creditors. As a result, from time to time we have delayed payment of subcontractor invoices. As of December 31, 2007 we had a net working capital deficit of ($3,072,895) versus a net working capital deficit of ($3,080,660) at September 30, 2007. In the three months ended December 31, 2007, operations used net cash of $16,158, as compared to $33,976 provided by operations during the period ended December 31, 2006. This $50,134 change was primarily a result of the increase in our accounts receivable balance. Our accounts receivable at December 31, 2007, have increased by $157,733 since September 30, 2007, as we earned revenue that had not yet been paid for by customers. Notes payable with current maturities decreased by $20,664 from September 30, 2007 as a result of the payment of certain notes while accounts payable grew slightly by $27,702 during the same period. In the period ended December 31, 2007, investing activities did not use cash while it used $19,402 during the period ended December 31, 2006. The primary reason for the change was purchases of equipment and cost of software in the prior year period. 13 Financing activities in the period ended December 31, 2007, used $55,205 as compared to net cash used of $10,000 in financing activities in the period ended December 31, 2006. The change was a result of the paying down of certain interest bearing notes. Accounts receivable balances at December 31, 2007 and 2006, 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 increased 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. Other delays in payment are associated with a number of factors, reflecting the financial vagaries of public sector organizations, routine administrative procedures and the normal processing delays often experienced in summer and holiday periods. Management believes that we will receive payment from all remaining sources but with some delays in timeliness. The elevated levels of aged accounts receivable we experience periodically, coupled with the need to finance projects with cash from operations, places cash flow constraints on the Company requiring it to very closely manage its expenses and payables. From time to time we have also borrowed funds from officers and employees to meet working capital needs. Capital Resources Our Master Factoring Agreement ("Amendment") with Rockland Credit Finance, LLC ("Rockland") was most recently extended to June 30, 2008, and the required volume of financed receivables is a three month average of $250,000 per month. Operations Outlook While our factoring arrangement is improved (see above) and we have previously raised funds from the sale of redeemable preferred stock, we expect that our operations will continue to be impacted by liquidity issues and the contracting US economy through the end of calendar year 2008. 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. 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. We believe our purchase of the XMARC intellectual property and spatial integration software components provides us with increased access with additional solution architectures to federal, state and local government clients in addition to commercial enterprises. We have continued to build revenue from maintenance of existing XMARC systems already in the field resulting from additional licensing of Xmarc and STEPs, a derivative product. Recurring revenue from Xmarc based products now exceeds $600,000 per annum. As of February 28, 2008, we had work backlog and assignments of approximately $3.98 million, a decrease from the $5.5 million reported for December 31, 2006. All of the backlog at December 31, 2006, was funded while $3.1 million of our current backlog is funded. Xmarc and derivative product licensing sales do not enter our backlog data, although maintenance and value added reseller fees are included. The decrease in backlog and assignments from December 31, 2006 was caused by the natural drawdown of multi-year contracts, the transfer of a China based project with associated backlog to a business partner; the completion of certain China based projects without replacement assignments, and, generally, a reduced number 14 of competitive opportunities, in part as a result of a contracting economy and in part as a consequence of our need to constrain marketing budgets as a result of cash flow issues. Management has also taken the course of reducing its efforts in pursuit of additional projects in China as a prime contractor as a result of increased national (i.e. Chinese) and international competition and the bundling by the World Bank of multiple projects and multiple jurisdictions into single contracts. Delays in the completion of several competitive awards also impeded the receipt of new contracts to replace backlog converted to revenue. 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. We have made progress in positioning ourselves as a provider of Internet-accessible data repositories and warehouses that leverage spatial data through portals and executive dashboards. Several of our current assignments and a material portion of our contract backlog and assignments are associated with these initiatives. A recent example is the San Francisco Department of Telecommunications and Information Systems that awarded us a project during fiscal year 2006 to build out the "hub" of an inter-agency repository for the City and County's Criminal Justice System; they subsequently extended that assignment on two occasions. Recently we also successfully undertook the modernization of a military health systems forecasting toolset and database for Altarum Institute and we are now pursuing additional assignments through this third party. In addition, we plan to grow internally through strategic alliances that enhance shareholder value and joint marketing initiatives that allow us to increase business with our limited resources while continuing to examine a diverse range of options to enhance shareholder value, including the sale of operating assets, the licensing of intellectual property and merger and acquisition opportunities. Results of Operations Result of Operations for the three months Ended December 31, 2007 Revenues Our revenues decreased $392,409 or 28% from $1,426,039 for the quarter ended December 31, 2006 to $1,033,630 for the quarter ended December 31, 2007. This decrease was caused primarily by a lower number of active revenue generating projects in our system. Costs and Expenses Total costs and expenses for the quarter ended December 31, 2007 amounted to $1,020,685, a $291,261 decrease from the $1,311,946 for the quarter ended December 31, 2006. This 22% decrease is primarily due to more efficient utilization of resources and actions taken to reduce management costs associated with revenue generation. Direct contract costs decreased by $228,334, or 30%; the decrease was primarily related to a 40% decrease in subcontractor costs of $184,998 and a decrease of $46,531 in direct salaries or 16%. However, the overall 30% decrease in direct contract costs was proportionately lower than the 22% decrease in revenues. Salaries and benefits decreased somewhat by approximately $41,024, or 12% as a result of attrition. General and administrative expenses decreased $11,290, or 8%, primarily as a result of decreases in legal expenses and bank fees; marketing expenses decreased further by $4,287, or 63%, as a result of limited budgets and a higher reliance on third party partners; and, finally, other operating costs decreased 6,326, or 10%, primarily as a result of decreased depreciation and amortization expenses. Net Income On a consolidated basis, we reported operating income of $12,945 for the quarter ended December 31, 2007, as compared to operating income of $114,093 in the prior year. This change is primarily attributable to decreased revenues during the current quarter. 15 Interest expense amounted to $43,671 in the current quarter compared with $53,276 during the same period of the prior year; the decrease occurred because of reduced factoring of accounts receivable. Other income increased from the prior year total by $2,098 due to increases in royalties earned. On a consolidated basis, we are reporting a net loss of $686 for the quarter ended December 31, 2007, as compared to net income of $88,757 for the prior year period. The items noted above account for the change to net loss. Income Taxes and Deferred Tax Valuation Allowance -- FY 2008 We reported net income for the three months ended December 31, 2007. Coupled with losses in prior years, we have generated a sizeable federal tax net operating loss, or NOL, carryforward which totals approximately $19.1 million as of December 31, 2007, comparable to $19.1 million at September 30, 2007. 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, 2007. 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, 2007 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, 2007. 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. 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 2008. 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 will be required to attest to the accuracy of management's evaluation report effective with our fiscal year ending September 30, 2009. 16 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS. N/A ITEM 6. EXHIBITS. (a) Exhibits: Exhibit 31.1, Section 302 Certification for the principal executive officer, dated April 19, 2008, and filed on page 19 of this report. Exhibit 31.2, Section 302 Certification for the principal financial officer, dated April 19, 2008, and filed on page 21 of this report. Exhibit 32.1, Sarbanes-Oxley Section 906 Certification for Chief Executive Officer, dated April 19, 2008, and filed on page 23 of this report. Exhibit 32.2, Sarbanes-Oxley Section 906 Certification for principal financial officer, dated April 19, 2008, and filed on page 24, of this report. 17 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: April 19, 2008 /S/ Fred Beisser ---------------- Frederick G. Beisser Senior Vice President-Finance, Secretary & Treasurer (Principal financial and accounting officer) 18 EX-31.1 2 plang120731-1.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 for the period ended December 31, 2007, of PlanGraphics, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: April 19, 2007 /s/ John C. Antenucci ----------------------------------- John C. Antenucci President and Chief Executive Officer 19 EX-31.2 3 plang120731-2.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 for the period ended December 31, 2007 of PlanGraphics, Inc.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the small business issuer as of, and for, the periods presented in this report; 4. The small business issuer's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the small business issuer and have: a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the small business issuer, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c. Evaluated the effectiveness of the small business issuer's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d. Disclosed in this report any change in the small business issuer's internal control over financial reporting that occurred during the small business issuer's most recent fiscal quarter (the small business issuer's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the small business issuer's internal control over financial reporting; and 5. The small business issuer's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the small business issuer's auditors and the audit committee of the small business issuer's board of directors (or persons performing the equivalent functions): a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the small business issuer's ability to record, process, summarize and report financial information; and b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the small business issuer's internal control over financial reporting. Date: April 19, 2008 /s/ Fred Beisser ----------------------------------- Frederick G. Beisser Senior Vice President - Finance (principal financial officer) 20 EX-32.1 4 plang120732-1.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 ended December 31, 2007, 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 April 19, 2007 A signed original of this written statement required by Section 906 has been provided to PlanGraphics, Inc. and will be retained by PlanGraphics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. 21 EX-32.2 5 plang120732-2.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 ended December 31, 2007, 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) April 19, 2008 A signed original of this written statement required by Section 906 has been provided to PlanGraphics, Inc. and will be retained by PlanGraphics, Inc. and furnished to the Securities and Exchange Commission or its staff upon request. 22 -----END PRIVACY-ENHANCED MESSAGE-----