-----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, EVth7odAOlfFwoMCdpO8/xpdP9BLKrnlJyFGzvnJK/k/KJOF+AWuVWuUbIDpzRfb H3TvIu926rNkRUxboYEtDA== 0001108890-07-000124.txt : 20070605 0001108890-07-000124.hdr.sgml : 20070605 20070605152826 ACCESSION NUMBER: 0001108890-07-000124 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 20051231 FILED AS OF DATE: 20070605 DATE AS OF CHANGE: 20070605 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: 07900865 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 plangraphics10qsb123105.txt PERIOD ENDED 21-31-05 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, 2005. 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 10940 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] 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 May 31, 2007 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; 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") 2006 and 2007; 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, 2005, (filed with the SEC on Form 10-KSB) under the caption "Item 1. Business - Risk Factors" beginning on page 11, 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 11 Item 3. Controls and Procedures 15 Part II Other Information 16 Item 1. Legal Proceedings 16 Item 6. Exhibits 16 Signature Page 17 Exhibits 3
Part I Financial Information Item 1. Financial Statements PLANGRAPHICS, INC. CONSOLIDATED BALANCE SHEET (Unaudited) December 31, 2005 ASSETS CURRENT ASSETS Cash and cash equivalents $ 5,128 Accounts receivable 2,546,089 Prepaid expenses and other 73,828 ------------ Total current assets 2,625,045 ------------ PROPERTY AND EQUIPMENT Equipment and furniture 384,494 ------------ 384,494 Less accumulated depreciation and amortization 315,163 ------------ 69,331 ------------ OTHER ASSETS Goodwill 1,457,107 Software, for future project use, net of accumulated amortization of $327,216 411,093 Other 30,105 ------------ 1,898,305 ------------ TOTAL ASSETS $ 4,592,681 ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Notes payable - current maturities $ 109,694 Notes payable - related parties 4,500 Accounts payable 2,718,485 Accrued payroll costs 444,677 Accrued expenses 416,131 Deferred revenue and prebillings 646,887 ------------ Total current liabilities 4,340,374 ------------ LONG-TERM LIABILITIES Notes payable, less current maturities 100,000 ------------ TOTAL LIABILITIES 4,440,374 ------------ 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 (20,535,811) ------------ 152,307 ------------ TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,592,681 ============ See accompanying notes to unaudited consolidated financial statements 4
PLANGRAPHICS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) Three Months ended December 31, 2005 2004 ------------ ------------ Revenues $ 1,080,069 $ 1,759,787 Cost of sales: Direct contract costs 718,032 1,318,394 Salaries and employee benefits 344,856 410,321 General and administrative expenses 257,497 210,467 Marketing expenses 21,068 40,689 Other operating expenses 58,671 74,445 ------------ ------------ Costs and expenses 1,400,124 2,054,316 ------------ ------------ Operating loss (320,055) (294,529) ------------ ------------ Other income (expense): Other income 11,703 19,429 Interest expense (30,539) (54,021) ------------ ------------ (18,836) (34,592) ------------ ------------ NET LOSS $ (338,891) $ (329,121) ============ ============ 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) 2005 2004 ----------- ----------- Cash flows provided by (used in) operating activities: Net loss $ (338,891) $ (329,121) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 58,671 74,445 Changes in operating assets and liabilities: Accounts receivable 126,663 156,734 Prepaid expenses and other 2,874 (13,916) Other assets (2,604) (1,540) Accounts payable 193,810 329,049 Accrued expenses 6,658 (277,919) Deferred revenue and prebillings (177,851) 338,469 ----------- ----------- Net cash provided by (used in) operating activities (130,670) 276,201 ----------- ----------- Cash flows provided by investing activities: Addition to software for future project use (50,380) -- Proceeds from sale of Jobview 198,250 -- ----------- ----------- Net cash provided by investing activities 147,870 -- ----------- ----------- Cash flows used in financing activities: Proceeds from debt -- 1,617,900 Payments on debt -- (1,777,319) Payments on notes payable - related parties (13,500) (9,000) Payments on obligations under capital lease -- (36,118) ----------- ----------- Net cash used in financing activities (13,500) (204,537) ----------- ----------- Net Increase in cash 3,700 71,664 Cash and cash equivalents at beginning of period 1,428 19,557 ----------- ----------- Cash and cash equivalents at end of period $ 5,128 $ 91,221 =========== =========== 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, 2005, 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, 2005. 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 January 2006, 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. During the fiscal years of 1998 through 2005, and continuing into fiscal 2006, 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 team, and using attrition of senior and middle management to reduce costs. In August 2006, the Company sold $500,000 of redeemable preferred stock (see subsequent events, below). 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, 2006. These financial statements should be read in conjunction with the Company's financial statements and notes for the year ended September 30, 2005, 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. (2) Accounts Receivable The components of contract receivable are as follows: December 31, 2005 (unaudited) Billed $ 684,857 Unbilled 1,861,232 ------------ 2,546,089 Less allowance for doubtful accounts -- ------------ Accounts receivable, net $ 2,546,089 7 At December 31, 2005, customers exceeding 10% of billed accounts receivable were international clients in China, 18%, the City of New York Department of Environmental Engineering (NYDEP), 17%, and the County of Los Angeles, 10%. At the same date, customers exceeding 10% of revenue for the quarter were China, 16%, Los Angeles, 13%, and NYCDEP, 12%. At December 31, 2004, customers exceeding 10% of billed accounts receivable were NYDEP, 19% and the Italian Ministry of Finance, 10%. At the same date, customers exceeding 10% of revenue for the quarter were NYCDEP, 40%, and China, 17%. Billing terms are negotiated in a competitive environment and are 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 $646,887 at December 31, 2005 and represents amounts billed in excess of amounts earned. The decreased level from September 30, 2005 is a result of our work on projects and rendering services related to sales of certain software requiring future services. (3) Provision for Income Taxes At the beginning of this fiscal year we had net operating loss carryforwards of $15.2 million with expirations through 2025. At December 31, 2005, the amount of the net operating loss carryforward balance is estimated at $15.5 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, 2005 and at December 31, 2005. As a result, no provision or benefit for income tax has been recorded for the three months ended December 31, 2005. (4) Lease Obligations We lease various equipment as well as facilities under operating leases that expire through the year 2011. (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, 2005 and 2004, were 14,255,639 and 12,652,803, 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, 2005 2004 ---- ---- 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, 2005 and 2004 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. 8 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, 2005 and 2004: 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: Three Months Ended December 31, 2005 2006 =============================== Net Income (loss): As reported $ (338,891) $ (329,121) Incremental Compensation $ 20,135 $ 25,336 ============ ============ Pro forma $ (359,026) $ (354,457) ============ ============ 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) ============ ============ No options to acquire stock were granted during the quarter ended December 31, 2005. (6) Supplemental Cash Flow Information During the three months ended December 31, 2005, PlanGraphics paid $11,893 of interest. No payments of taxes were made. (7) Recently Issued Accounting Pronouncements We do not have any updates to the recently issued pronouncements provided in our Form 10-KSB for September 30, 2005. (8) Going Concern Statement The Company's auditors stated in their report on the financial statements of the Company for the year ended September 30, 2005 that the Company has incurred net losses for the years ended September 30, 2005 and 2004 and these factors raise substantial doubt about the Company's ability to continue as a going concern. For the three months ended December 31, 2005, the Company incurred net losses of $338,991 and used cash in operations of $130,670. These 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 9 funds needed to increase liquidity, fund growth in revenues and to implement its business plan; however, no assurance can be given that the Company will be able to raise any additional capital. (9) Subsequent Events Amendment to Factoring Agreement. PlanGraphics, Inc. entered into a First Amendment to the Master Factoring Agreement ("Amendment") with Rockland Credit Finance, LLC ("Rockland") effective January 9, 2006. The Amendment extended the term of the Master Factoring Agreement to June 30, 2007. In addition, the Amendment, among other things, increased the amount by which Rockland will pay PlanGraphics for accounts receivable invoices from 80% of the face value to 85% of the face value of such invoices and reduced the minimum monthly volume that PlanGraphics is required to submit to Rockland for purchase from $500,000 to $350,000. Sale of Preferred Stock. On August 21, 2006, the Company entered into a Series A Preferred Stock Purchase Agreement with Nutmeg Group, LLC pursuant to which it sold and Nutmeg Group, LLC bought, for an aggregate purchase price of $500,000, a total of 1,000 shares (the "Shares") of the Company's Series A 12% Redeemable Preferred Stock (the "Series A Preferred Stock") and a warrant to purchase shares of the Company's common stock equal to 80 percent of the fully diluted outstanding shares with an aggregate exercise price of $10.00 (the "Warrant,") and together with the Shares (the "Securities"). The Company intends to use the net proceeds of the sale of the Securities to pay its independent accountants amounts due to complete the 2005 annual report and subsequent quarterly reports, to satisfy certain of its accounts payable, and for general working capital purposes. Exercise of the Warrant by the investor could result in a change of control. Resignation of Directors. Board Chairman Gary S. Murray and Director Bill Strang tendered their resignations from the Board on August 16 and 17, 2006, respectively. Both Directors cited personal reasons for their resignation. On March 22, 2007, Raymund O'Mara tendered his resignation without citing a reason. Expiration of Contract with Executive. On October 31, 2006, a contract between the Company and its Chief Operating Officer expired without renewal. The officer determined on November 7, 2006, that he would not enter into any further extension. Termination of Senior Officer of PGI-MD. On June 23, 2006, we terminated the employment of an officer of our Mayrland subsidiary. Subsequently, he filed suit alleging the Company had insufficient basis for the termination, a claim that management contests. We have accrued and recorded an estimated amount for this litigation in the financial statements. Extension of Employment Agreements for Parent Company Officers. During February 2007 the Company entered into amendments to the employment agreements of its chief executive officer and its chief financial officer, to extend the term of their existing employment agreements through December 31, 2007. Additional information was provided in Form 8-K, dated January 31, 2007 and filed with the Securities and Exchange Commission. Retention of Guilford Securities. On October 1, 2006, the Company retained Guilford Securities as a non-exclusive corporate finance advisor. (10) 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. The total of all foreign currency transactions and translation adjustments were considered not to be material as of the end of the reporting period. 10 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 2005 approximately 76% of our sales were to customers in federal, state and local governments, and utilities; 18% to international customers and the remaining 6% to commercial enterprises. Our customers are located in the United States and foreign markets requiring locational or "spatial" information. The mix of customers remained constant through the first quarter of 2006. o We have a working capital deficit at December 31, 2005 of $1,715,329, and have had recurring net losses in all prior fiscal years back to 1998. The future viability of PlanGraphics is dependent upon our ability to achieve profitability in future operations. o Management's foremost challenge is coping with limited cash flows. Management continues to work closely with its creditors to manage payments and from time to time has borrowed funds from officers and employees to meet temporary working capital shortages. In January 2006 we entered into an extension of our Master Factoring Agreement with Rockland which extended it through June 30, 2007, reduced the required monthly volume down to $350,000 per month and increased to 85% of face value the amount paid on invoices submitted. o As a result of our very constrained cash flows, we sometimes delay payments to subcontractors and from time to time have delayed management and employee payrolls. We have experienced the departure of certain technical employees, reduced availability of subcontractors and increased legal costs related to negotiating work-out agreements and settlements with creditors. o About our business: o Our consulting and systems integration and implementation capabilities include business and web-enabled solutions exploiting the advanced technologies of spatial information management systems (also known as geographic information systems), data warehousing, electronic document management systems and internal and external networks. o We earn our revenues on contracts that are awarded as long as two to three years after we begin the initial sales process with a customer. In many instances we first provide consulting services to determine an appropriate solution to a need and then we subsequently receive a larger contract. o Our consulting and implementation practice operates nationally and abroad. We are also pursuing opportunities related to emergency preparedness and public safety throughout the U.S. o We believe the critical factors for the future success of PlanGraphics are: o Achieving 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 Increasing lagging revenue through expanded lead generation and sales; and o Attaining net income. 11 Financial Condition The following discussion of liquidity and capital resources addresses our requirements and sources as of December 31, 2005 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, 2005, appearing in our FY 2005 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, 2005 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 payrolls and amounts owed to subcontractors. Cash Flow We continue to experience very constrained cash flows causing 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 payrolls and payment of subcontractor invoices. As of December 31, 2005 we had a net working capital deficit of ($1,715,329) versus a net working capital deficit of ($1,545,375) at September 30, 2005. This additional decrease in working capital resulted from the operating losses. In the three months ended December 31, 2005, operations used net cash of $130,670, as compared to $276,201 provided by operations during the period ended December 31, 2004. This $406,871 change was primarily a result of the decrease in deferred revenue balances. Our accounts receivable at December 31, 2005 have decreased slightly by $126,664 since September 30, 2005. Notes payable with current maturities increased $73,600 from September 30, 2005 as a result of the maturing of certain notes. In the period ended December 31, 2005, investing activities provided $147,870 while we had no investing activities during the period ended December 31, 2004. The primary reason for the change was the receipt of $198,250, the amount due for the sale of our investment in Jobview. Financing activities in the period ended December 31, 2005 used $13,500 as compared to net cash used of $204,537 in financing activities in the period ended December 31, 2004. The change was a result of moving from a line of credit to a factoring arrangement in which the factor purchases our invoices. Accounts receivable balances at December 31, 2005 and 2004, 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. Certain 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. As of December 31, 2005 our billed contract accounts receivable were $684,857 and we had no allowance for uncollectible accounts. During the current quarter billed receivables in arrears greater than 60 days increased from $252,325 at September 30, 2005 to $487,092 and no client accounted for more than $160,000 at December 31, 2005. As of December 31, 2005, our number of days sales outstanding (DSO) were approximately 212 days, comparable with 166 days a year earlier. The large decrease in revenue skewed the DSO number upward. Management believes that its net receivables are ultimately collectible or recoverable. 12 The elevated levels of aged accounts receivable we experience, coupled with the need to finance projects 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 We entered into a First Amendment to the Master Factoring Agreement ("Amendment") with Rockland Credit Finance, LLC ("Rockland") effective January 9, 2006. The Amendment extended the term of the Master Factoring Agreement to June 30, 2007, The Amendment, among other things, increased the amount by which Rockland will pay PlanGraphics for accounts receivable invoices from 80% of the face value to 85% of the face value of such invoices and reduced the minimum monthly volume that PlanGraphics is required to submit to Rockland for purchase from $500,000 to $350,000. As of December 31, 2005, our cash and cash equivalents had increased from September 30, 2005 to $5,128. Operations Outlook While we now have secured an improved new factoring 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 liquidity issues through the end of calendar year 2007. 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 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 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. 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 Value Added Resellers opportunities in Europe. As of December 31, 2005, we had work backlog and assignments of approximately $13.1 million, a decrease from the $15.2 million reported for September 30, 2005 and from $ 15.7 million as of December, 2004. Approximately $9.5 million of the backlog at December 31, 2005 was funded versus approximatelty$11.4 million at September 30, 2005 and 14.4 million on December 31, 2004. Of the $9.5 million, in funded backlog we expected to complete approximately $5.5 million within 12 months. More recently our backlog and assignments as of February 17, 2007, amount to approximately $ 4.8 million, all of which is funded. The decrease in backlog and assignments from December 31, 2005 was caused by the drawdown of multi-year contracts, the termination of contracts with a state and local government agency, the transfer of a China based project to a business partner and delays in the completion of several competitive awards also hampered the process of securing new contracts to replace backlog converted to revenue. 13 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. The Company's non-binding letter of intent to merge with IceWEB, Inc. of Herndon, Virginia, as amended, expired without action by either party on December 31, 2005 in accordance with its terms. The Board of Directors continues to actively explore strategic alternatives for PlanGraphics, Inc. and retained Guilford Securities in October 2006 to provide advisory services on such efforts. We have made progress in positioning ourselves as a provider of Internet-accessible data repositories and warehouses that leverage spatial data through portals. 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 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 Results of Operations for the Quarter Ended December 31, 2005 Revenues Our revenues decreased $679,718 or 39% from $1,759,787 for the quarter ended December 31, 2004 to $1,080,069 for the quarter ended December 31, 2005. This decrease was caused by the winding down of certain projects, by reduced activities on open contracts and by a lower number of active contracts in the 2006 period. Deferred revenue decreased $177,851 from the beginning of fiscal year balance of $824,738 as a result of work on certain GIS and Xmarc contracts that caused additional revenue to be recognized thereby reducing deferred revenue balances, Costs and Expenses Total costs and expenses for the quarter ended December 31, 2005 amounted to $1,400,124, a decrease of $654,192 compared to $2,054,316 for the quarter ended December 31, 2004. This 32% decrease trails behind the 39% decrease in revenue for the period. Direct contract costs decreased $600,362 or 46% during the current quarter primarily from: the absence of $492,104 in imagery costs; a reduction in subcontractor costs of $385,794; a decrease of $190,366 in equipment provided to clients pursuant to contract requirements; a decrease of $116,954 in direct salaries; and miscellaneous expense decreases of $9.894, all of which were a result of completion of projects and activity reductions responding to decreased operations. These were partially offset by $102,646 of new expenses related to a supplier. Salaries and benefits decreased by approximately $65,465 because of reductions in staff related to the decrease in revenue. General and administrative expenses increased by $47,030, or 22% resulting from increased overhead expenses related primarily to rent expense, increases in audit fees and losses on foreign currency conversions. Marketing expense decreased $19,621, or 48%, caused primarily by a shift of business development activities through our business partners and by the need to reduce demand on cash. The decreases primarily occurred in proposal and conference expenses. Other operating costs decreased by $15,774 or 21% primarily as a result of the decrease in depreciation expense during the current period. Net loss Our operating loss for the quarter ended December 31, 2005 amounted to $320,055 versus the prior year operating loss of $294,529. The change is a result of decreased revenues during the current year period as compared to the prior year. 14 Interest expense amounted to $30,539 in the current quarter and compares favorably with $54,021 during the same period of the prior year because we no longer are financed by a line of credit. Other income decreased from the prior year total by $7,726. We incurred a net loss of $338,891 for the quarter ended December 31, 2005 as compared to a net loss of $329,121 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 reported a net loss for the quarter ended December 31, 2005. Coupled with losses in prior years, we have generated a sizeable federal tax net operating loss, or NOL, carryforward which totals approximately $15.5 million as of December 31, 2005 versus $15.2 million at September 30, 2005. 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, 2005. 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, 2005 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, 2005. 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 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. 15 PART II - OTHER INFORMATION ITEM 1: LEGAL PROCEEDINGS. There has been no change in status to the information reported in our Form 10-KSB for the year ended September 30, 2005. ITEM 6. EXHIBITS. (a) Exhibits: Exhibit 31.1,Section 302 Certification for the principal executive officer, dated June 1, 2007, and filed on page 18 of this report. Exhibit 31.2, Section 302 Certification for the principal financial officer, dated June 1, 2007, and filed on page 19 of this report. Exhibit 32.1, Sarbanes-Oxley Section 906 Certification for Chief Executive Officer, dated June 1, 2007, and filed on page 20 of this report. Exhibit 32.2, Sarbanes-Oxley Section 906 Certification for principal financial officer, dated June 1, 2007, and filed on page 21 of this report. 16 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: June 1, 2007 /s/ Frederick G. Beisser ----------------------------------- Frederick G. Beisser Senior Vice President-Finance, Secretary & Treasurer (Principal financial officer) 17 EX-31.1 2 plangraphicsexhib311-123105.txt CERTIFICATION OF CEO PER SECTION 302 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. for the quarterly period ended December 31, 2005; 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: June 1, 2007 /s/ John C. Antenucci ----------------------------------- John C. Antenucci President and Chief Executive Officer EX-31.2 3 plangraphicsexhib312-123105.txt CERTIFICATION OF CFO PER SECTION 302 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. for the quarterly period ended December 31, 2005; 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: June 1, 2007 /s/ Frederick G. Beisser ----------------------------------- Frederick G. Beisser Senior Vice President - Finance (principal financial officer) EX-32.1 4 plangraphicsexhib321-123105.txt CERTIFICATION OF CEO PER SECTION 906 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, 2005 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 June 1, 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. EX-32.2 5 plangraphicsexhib322-123105.txt CERTIFICATION OF CFO PER SECTION 906 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, 2005 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/ Frederick G. Beisser - ---------------------------------- Frederick G. Beisser Senior Vice President - Finance (principal financial officer) June 1, 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. -----END PRIVACY-ENHANCED MESSAGE-----