UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2009.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ___________ to _______________ .
Commission file number 0-14273
PLANGRAPHICS, INC.
---------------------------------------------------------------
(Exact name of small business issuer as specified in its charter)
COLORADO 84-0868815
------------------------------ -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
112 East Main Street
Frankfort, KY 40601
--------------------------------------
(Address of principal executive offices)
(Zip Code)
(502) 223-1501
----------------------------------------------
(Issuer's telephone number, including area code)
---------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X ] No [ ]
Indicate by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company.
Large Accelerated filer [ ] Accelerated filer [ ]
Non-accelerated filer [ ] Smaller reporting company [X]
Indicate by check mark whether the registrant is a shell company (as defined in
Exchange Act Rule 12b-2) Yes [ ] No [X]
500,718,173 shares of common stock (no par value) were outstanding
as of August 11, 2009.
Transitional Small Business Disclosure Format (Check one): Yes [ ] No [X]
CAUTIONARY NOTE ABOUT FORWARD-LOOKING STATEMENTS
Information in this Quarterly Report on Form 10-Q and the information
incorporated by reference includes "forward-looking statements" within the
meaning of the Private Securities Litigation Reform Act of 1995 and are covered
by its safe harbor provisions for such forward-looking statements.
Forward-looking statements may relate to, among other things, our expected
financial position and operating results, our business strategy, our financing
plans and the outcome of any contingencies. Our use of forward-looking words
such as "may," "believe," "plan," "will," "anticipate," "estimate," "expect,"
"intend," and similar expressions are intended to identify such statements.
Forward-looking statements are based on currently available information and our
current assumptions, expectations and projections about future events. We
undertake no obligation to update such statements except as required by law. You
are cautioned not to place undue reliance on our forward-looking statements as
they are not guarantees of future performance.
Forward-looking statements include, but are not limited to, statements in this
Form 10-Q regarding:
o availability of working capital to meet our immediate cash and liquidity
needs;
o our ability, or the ability of Integrated Freight to complete the
contemplated transactions as described herein;
o our ability to raise funds through debt and equity financing;
o estimates regarding our financing needs;
o our prospects for growth, both accretive and acquisitive;
o our ability to reduce costs and expenses
o the collectibility of our accounts receivable;
o cancellation of our contracts and order assignments;
o the continuation of our relationship with key clients;
o the increase in competition and our ability to compete effectively;
o our ability to take advantage of targeted markets;
o the strength of our technical expertise and customer service;
o the potential fluctuation of the market price of our stock;
o the potential gross profit margin ;
o the projections regarding our financial results for fiscal years ("FY")
2009 and 2010;
o fluctuations in exchange rates;
o the impact of recent accounting pronouncements; and
o the availability and affordability of alternative lease facilities.
Although we believe that the expectations expressed in our forward-looking
statements are reasonable, we cannot promise that our expectations will turn out
to be correct or will be accomplished in the time frame we contemplate. Our
actual results could be materially different from our expectations, including
the following:
o we may not be able to complete, or complete in a timely fashion, the
transaction with Integrated Freight as described herein;
o we may continue to experience significant liquidity issues and may not
overcome the underlying causes;
o we may not be able to obtain needed financing for operations or
diversification;
o
o We may not find an adequate market for our services in the current
economic environment;
o we may experience work stoppages by subcontractors due to our late
payments;
o we may lose customers or fail to grow our customer base;
o we may fail to compete successfully with existing and new competitors;
o we may not achieve profitability;
o we may not adequately anticipate and respond to technological developments
impacting our services; and
o we may issue a substantial number of shares of our common stock upon
exercise of options and warrants to secure funds, thereby causing
dilution in the value of your investment.
The above list identifies some of the principal factors that could cause actual
results to differ materially from those in the forward-looking statements
included elsewhere in this report but does not represent a complete list of all
risks and uncertainties inherent in our business. It should be read in
conjunction with the more detailed cautionary statements included in our Annual
Report on Form 10-KSB for the year ended September 30, 2008, and our other
Securities and Exchange Commission filings, and our press releases.
2
PlanGraphics, Inc.
Table of Contents
Part I Financial Information 4
Item 1. Consolidated Financial Statements (Unaudited) 4
Consolidated Balance Sheets 4
Consolidated Statements of Operations 5
Consolidated Statements of Cash Flows 6
Notes to Unaudited Consolidated Financial Statements 7
Item 2. Management Discussion and Analysis 15
Item 4. Controls and Procedures 19
Part II Other Information 20
Item 1. Legal Proceedings 20
Item 2. Unregistered Sales of Equity Secuirities and Use of Proceeds 20
Item 6. Exhibits 20
Signature Page 22
Exhibits 23
Part I Financial Information
Item 1. Financial Statements
PlanGraphics, Inc.
CONSOLIDATED BALANCE SHEETS
June 30, 2009 September 30, 2008
(Unaudited) (Derived
from
audtited
financial
statements)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 89 $ 202
Prepaid expenses and other 4,121 --
Current assets of discontinued operations 488,450 754,079
------------ ------------
Total current assets 492,660 754,281
------------ ------------
PROPERTY AND EQUIPMENT
Equipment and furniture 2,000 2,000
Less accumulated depreciation and amortization (2,000) (2,000)
Long-term assets of discontinued operations 15,433 23,169
------------ ------------
15,433 23,169
------------ ------------
OTHER ASSETS
Other assets of discontinued operations 113,976 195,759
------------ ------------
113,976 195,759
------------ ------------
TOTAL ASSETS $ 622,069 $ 973,209
============ ============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Mandatory redeemable Series A preferred stock, $0.001 par value,
nil and 500 shares issued and outstanding at June 30,
2009, and at September 30, 2008, respectively $ -- $ 500,000
Notes payable - current maturities 37,668 7,668
Accounts payable 173,393 142,778
Accrued payroll costs 20,361 13,256
Accrued expenses 116,721 244,052
Current liabilities of discontinued operations 3,254,574 3,316,001
------------ ------------
Total current liabilities 3,602,717 4,223,755
------------ ------------
Total liabilities 3,602,717 4,223,755
------------ ------------
STOCKHOLDERS' DEFICIT
Common stock, no par value, 2,000,000,000 shares authorized,
500,718,173 and 99,158,706 shares issued and outstanding
at June 30, 2009 and September 30, 2008, respectively 21,368,578 20,706,005
Accumulated deficit (24,349,226) (23,956,551)
------------ ------------
Total Stockholders' Deficit (2,980,648) (3,250,546)
------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 622,069 $ 973,209
============ ============
See accompanying notes to unaudited consolidated financial statements
4
PlanGraphics, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
Unaudited)
For the three and nine month periods ended June 30,
Nine months ended Three months ended
2009 2008 2009 2008
------------- ------------- ------------- -------------
Revenues $ -- $ -- $ -- $ --
Costs and expenses
Salaries and employee benefits 49,973 55,841 14,971 18,488
General and administrative expenses 99,579 98,585 46,329 33,722
Marketing expenses -- 455 -- --
------------- ------------- ------------- -------------
Total costs and expenses 149,552 154,881 61,300 52,210
------------- ------------- ------------- -------------
Operating loss (149,552) (154,881) (61,300) (52,210)
------------- ------------- ------------- -------------
Other expense:
Interest expense (38,307) (45,041) (7,846) (14,959)
------------- ------------- ------------- -------------
(38,307) (45,041) (7,846) (14,959)
------------- ------------- ------------- -------------
Loss from continuing operations (187,859) (199,922) (69,146) (67,169)
------------- ------------- ------------- -------------
Discontinued operations
Operating loss from discontinued operations (289,194) (86,436) (148,764) (29,108)
Other Income 127,139 63,365 3,533 19,985
Interest Expense (42,773) (65,541) (6,843) (3,602)
------------- ------------- ------------- -------------
Loss from discontinued operations (204,828) (88,612) (152,074) (12,725)
Net loss $ (392,687) $ (288,534) $ (221,220) $ (79,894)
============= ============= ============= =============
Basic and diluted loss per common share
Loss from continuing operations $ (0.001) $ (0.002) $ (0.000) $ (0.001)
Loss from discontinued operations (0.001) (0.001) (0.001) (0.000)
------------- ------------- ------------- -------------
Net loss per common share $ (0.003) $ (0.003) $ (0.001) $ (0.001)
============= ============= ============= =============
Weighted average number of common shares
outstanding 146,698,861 97,214,418 244,779,172 97,214,418
See accompanying notes to unaudited consolidated financial statements
5
PlanGraphics, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months ended June 30,
2009 2008
--------- ---------
Cash flows provided by operating activities:
Loss from discontinued operations $(204,828) $ (88,612)
Loss from continuing operations (187,859) (199,922)
--------- ---------
Net loss (392,687) (288,534)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Changes in operating assets and liabilities
Prepaid expenses and other (4,121) (4,112)
Accounts payable 30,614 22,527
Accrued expenses 42,346 27,908
--------- ---------
Net cash used in continuing operating activities (323,848) (242,211)
--------- ---------
Adjustments to reconcile net loss to net cash provided by discontinued
operating activities:
Depreciation and amortization 88,951 147,578
Allowance for doubtful accounts (35,555) 19,825
Gain on debt extinguishment (7,414) --
Gain on fair value recognition of accounts payable (91,516) --
Net change in discontinued operating assets and liabilities 333,910 234,232
--------- ---------
Net cash provided by discontinued operating activities 288,376 401,635
--------- ---------
Net cash provided by (used in) operating activities (35,472) 159,424
--------- ---------
Cash flows used in investing activities:
Purchases of equipment -- (3,602)
Software developed for future use (806) (58,706)
--------- ---------
Net cash used in investing activities - discontinued operations (806) (62,308)
--------- ---------
Cash flows provided by (used in) financing activities:
Cash flows provided by continuing operations
Proceeds from debt 30,000 --
--------- ---------
Net cash provided by continuing operations 30,000 --
--------- ---------
Cash flows provided by discontinued operations
Proceeds from note payable - related party 13,750 --
Payments on debt (6,623) (174,677)
--------- ---------
Net cash provided by (used in) discontinued operations 7,127 (174,677)
--------- ---------
Net cash provided by (used in) financing activities 37,127 (174,677)
--------- ---------
Net increase (decrease) in cash 849 (77,561)
Cash and cash equivalents at beginning of year 404 78,642
--------- ---------
Cash - continuing operations 89 35
Cash - discontinued operations 1,164 1,046
--------- ---------
Cash and cash equivalents at end of period $ 1,253 $ 1,081
========= =========
See accompanyint notes to unaudited consolidated financial statements
6
PLANGRAPHICS, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(1) Consolidated Financial Statements
The summary of our significant accounting policies is incorporated herein by
reference to our annual report of September 30, 2008, on Form 10-KSB filed with
the Securities and Exchange Commission. Readers are also herewith advised to
read the going concern statement in the report of our Independent Registered
Accounting Firm and also the liquidity caution in Note B in our consolidated
financial statements for the period ended September 30, 2008.
The accompanying unaudited consolidated financial statements in this report have
been presented on the going concern basis which contemplates the realization of
assets and the satisfaction of liabilities in the normal course of business.
While we secured an improved factoring agreement for accounts receivable during
2007 and 2008 that has been extended through September 30, 2009, and a similar
factoring agreement with Bibby Financial Services in support of our Xmarc
subsidiary, that we implemented in June , 2009, our viability to continue as a
going concern is dependent upon our ability to achieve and increase profitable
operations through increased sales and the higher profit margins received from
Xmarc sales. During the fiscal years of 1998 through 2008 we have experienced
significant operating losses with corresponding reductions in working capital
and stockholders' equity. Beyond our factoring agreements, we do not currently
have any external financing in place to support operating cash flow
requirements. Our revenues and backlog have also decreased substantially.
To address the going concern issue, management implemented financial and
operational plans to improve operating efficiencies, reduce overhead and
accelerate cash from our contracts, reduce and eliminate cash losses, and
position us for future profitable operations. We have reduced our general and
administrative expenses by reducing occupancy costs, streamlining our executive
and administrative support team, and using attrition to reduce costs.
The accompanying unaudited consolidated financial statements for PlanGraphics,
Inc. and its operating subsidiary in this quarterly report reflect all
adjustments which, in the opinion of management, are necessary for a fair
presentation of the results of operations, financial position and cash flows.
All significant inter-company balances and transactions have been eliminated in
our consolidation. We believe that the disclosures are adequate to make the
information presented not misleading. The results of this interim period are not
necessarily indicative of the results for the full fiscal year ending September
30, 2009. These consolidated financial statements should be read in conjunction
with the Company's financial statements and notes for the year ended September
30, 2008, included in the Company's Annual Report on Form 10-KSB.
Reclassifications resulting from discontinued operations. During the current
quarter, the Company determined to sell its operating subsidiary, PlanGraphics
of Maryland (including its two subsidiaries). Accordingly, the related assets
and liabilities were reclassified in the current report as held for sale in the
consolidated balance sheets in accordance with Statement of Financial Accounting
Standards ("SFAS") No. 144, "Accounting for the Disposal and Impairment of
Long-Lived Assets" ("SFAS 144") and Emerging Issues Task Force ("EITF") Issue
No. 03-13, "Applying the Conditions in Paragraph 42 of FASB Statement No. 144 in
Determining Whether to Report Discontinued Operations" ("EITF 03-13"). Both
current and historical operating results of the subsidiary have been
reclassified as discontinued operations. Depreciation and amortization on
long-lived assets of the subsidiary were also reclassified to discontinued
operations. Certain amounts in the Company's condensed consolidated financial
statements for prior periods have also been reclassified to conform to the
current period presentation.
(2) Going Concern Statement and Management's Plan
Going Concern. As reported in the consolidated financial statements accompanying
our annual report on Form 10-KSB for the year ended September 30, 2008, the
Company incurred net losses for the years ended September 30, 2008 and 2007. The
Company has also suffered recurring losses, has a negative working capital
position and a stockholders' deficit. As noted in the auditor's report on our
September 30, 2008, financial statements, these factors raise substantial doubt
about the Company's ability to continue as a going concern.
7
For the nine months ended June 30, 2009, the Company is reporting a net loss of
$392,687 and cash used in operations amounted to $35,472, representing further
deterioration of both net loss and cash flows from the same period of the prior
year. The Company has had a history of net losses over the years. These
consolidated financial statements do not include any adjustments relating to the
recoverability and classification of recorded assets, or the amounts and
classification of liabilities that might be necessary in the event the Company
cannot continue in existence.
Management has taken aggressive action to reduce operating costs to the maximum
extent possible and has taken steps intended to increase the sales of the
Company's products and services. Management continues to seek financing to
provide funds needed to increase liquidity, fund growth in revenues and to
implement its business plan. We continue to explore sources of working capital
from additional debt or equity financings or from the sale of certain assets. In
the absence of one of these alternatives our ability to operate our business and
fund our operations could be materially and adversely affected. No assurance can
be given that the Company will be able to raise any additional capital.
Board's Plan for PlanGraphics, Inc. PlanGraphics has experienced declining
revenues in the past several years. The costs for audits, legal advice, other
items related to the Company's SEC reporting and maintaining its status as a
public company are significant and are having an adverse effect on our ability
to successfully operate our core business. Based on this combination of
declining revenues and increasing costs, in 2003, the Company's Board of
Directors began examining strategic alternatives for PlanGraphics and retained a
number of specialist investment banking firms to assist with this process.
Through these efforts, and in parallel with efforts to maintain and build on our
traditional lines of business, the Board has concluded that in order to provide
shareholders with some opportunity for achieving value on their investment
PlanGraphics needs to aggressively pursue the option of deriving value from one
or more of the assets of the corporation. One such option that the Company has
pursued in recent years is the spin-off of PGI-MD and the sale of PlanGraphics,
the public entity, to a private company interested in becoming a publicly traded
corporation.
The Company has issued 401,559,467 shares of its common stock in satisfaction of
the redemption payment obligations for its outstanding Series A Redeemable
Preferred Stock to Integrated Freight Systems, Inc., who had purchased the
outstanding preferred stock from the Nutmeg Group. The issue of these shares
resulted in a change in control of PlanGraphics. Integrated Freight, as the
80.2% majority stockholder of PlanGraphics, has demanded a special shareholders'
meeting at which the stockholders of PlanGraphics are expected to approve the
spin-off of PGI-MD to John Antenucci, our chief executive officer; a reverse
stock split; and a merger of PlanGraphics into Integrated Freight. The merger is
a statutory merger under both Colorado and Florida corporate law. See also Note
14, Subsequent Events.
Discontinued Operations. Pending completion of the merger noted above, the
Company has assigned the assets and liabilities of its operating subsidiary,
PGI-MD which is now considered held for sale, to discontinued operations.
PlanGraphics Continuing Operations. Pending completion of the merger noted
above, the Company's continuing operations consist of administration of the
Colorado corporation's public entity which has no revenues and incurs certain
ongoing compensation costs, interest and public company reporting expenses.
(3) Accounts Receivable - Discontinued Operations
The components of contract receivables in discontinued operations are as
follows:
June 30,
2009
----------
Billed $ 415,828
Unbilled 61,458
---------
477,286
Less: net of allowance for doubtful accounts less prior
doubtful account amounts written off (14,151)
---------
Accounts receivable, net $ 463,135
=========
8
At June 30, 2009, customers exceeding 10% of billed accounts receivable were the
Italian Ministry of Finance ("IMF"), 20%, Liaoning, China , 19%, and Panjin,
China, 14%. At the same date, customers exceeding 10% of revenue for the nine
month period were the San Francisco Department of Technology and Information
Systems, 13%, the IMF, 19%, and Dawson County, Georgia, 14%.
At June 30, 2008, customers exceeding 10% of billed accounts receivable were
international clients in China (in the aggregate), 18%, New York City Department
of Environmental Engineering (NYDEP), 24%, and the Italian Ministry of Finance
("IMF"), 23%. At the same date, customers exceeding 10% of revenue were NYDEP,
23%, San Francisco Department of Technology and Information Systems, 17%, and
the IMF, 13%.
Billed receivables include $10,378 for the net amount of factored invoices due
from Rockland. This amount is comprised of the amount of outstanding uncollected
invoices on hand at Rockland ($69,186) less the net amount of funds employed by
Rockland in servicing them ($58,808) which consists of actual cash advances,
payments, and other reserves and fees related to the factoring agreement.
Pursuant to the factoring agreement Rockland was granted a lien and security
interest in all of our cash, accounts, goods and intangibles.
Billing terms are negotiated in a competitive environment and are typically
based on reaching project milestones.
When appropriate we establish a reserve ("allowance for doubtful accounts") for
estimated uncollectible amounts of billed and unbilled accounts receivable. When
we determine that the collection of a billed or unbilled account receivable
related to an active contract is not probable, we reduce the contract value
accordingly. When we determine that the collection of a billed or unbilled
account receivable related to a completed contract is not probable, we record
bad debt expense and increase the allowance for doubtful accounts. When we
identify that the collection of a reserved account receivable will not be
collected, we write off the account receivable and reduce the allowance for
doubtful accounts.
Deferred revenue (in discontinued operations) amounted to $113,775 at June 30,
2009, and represents amounts billed in excess of amounts earned. These amounts
are offset by work in progress which represents work completed but not yet
invoiced but included in Accounts Receivable, typically pending completion of
payment milestones.
(4) Lease Obligations
We lease various equipment as well as facilities under operating leases that
expire through the year 2013.
(5) Stock-Based Compensation.
We follow the provisions of SFAS No. 123R, Share Based Payment. SFAS No. 123R
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the statement of operations as compensation
expense (based on their fair values) over the vesting period of the awards.
Option valuation models (we use the Black-Scholes model) to estimate fair value
require the input of highly subjective assumptions including the expected life
of the option. Because our employee stock options have characteristics
significantly different from those of traded options (which we do not have), and
because changes in the subjective input assumptions can materially affect the
fair value estimate, in management's opinion, the existing models do not
necessarily provide a reliable single measure of the fair value of our employee
stock options.
While we did not grant options to acquire shares of common stock during the
period ended June 30, 2009, we granted options to acquire 972,144 shares of
common stock during the nine months ended June 30, 2008.
There were no options exercised during the period ending June 30, 2009;
accordingly, the total intrinsic value of options exercised to date during
fiscal year 2009 is $0.
Because we did not have any unvested options or warrants as of June 30, 2009,
there was no unrecognized compensation cost related to non-vested share-based
compensation arrangements granted under the now expired Equity Compensation Plan
which continues to have option grants outstanding.
9
Additional information regarding the status of stock options outstanding at June
30, 2009 appears in the following tables; we had no warrants outstanding at that
date.
Options
------------------------------------
Weighted
Number of Average
Shares Exercise Price
------ --------------
Outstanding
at 9/30/2008 5,966,432 $ 0.021
Granted -- --
Expired or Cancelled (1,272,144) 0.040
Exercised -- --
---------- ---------
Outstanding
at 6/30/2009 4,694,288 $ 0.014
---------- ---------
Exercisable
at 9/30/2008 5,966,432 $ 0.021
---------
Exercisable
at 6/30/2009 4,694,288 $ 0.015
---------
Stock Options
-----------------------------------------------------------------
Range of Weighted-average
Exercise Shares Remaining Years
Prices Contractual Life
-----------------------------------------------------------------
$0.0048-$0.015 4,694,288 2.36
(6) Net Loss Per Common Share.
Basic loss per share includes no dilution and is computed by dividing income or
loss attributable to common shareholders by the weighted average number of
common shares outstanding for the period. Diluted earnings per share reflects
the potential dilution of securities that could share in the earnings of an
entity, when appropriate. The total number of shares of common stock issuable
upon exercise of warrants and options outstanding and exercisable at June 30,
2009 and 2008, were 4,694,288 and 5,966,502, respectively.
2009 2008
---- ----
Options 4,694,288 5,966,502
Warrants -- --
--------- ---------
Total outstanding 4,694,288 5,966,502
The following table is a reconciliation of the number of shares used in the
Basic Earnings Per Share ("EPS") and Diluted EPS computations:
10
Nine months ended June 30, Three months ended June 30,
2009 2008 2009 2008
----------- ----------- ----------- -----------
Basic EPS share quantity
Weighted average number of shares outstanding 145,093,553 97,214,418 239,027,734 97,214,418
Effect of dilutive options and warrants* -- -- -- --
----------- ----------- ----------- -----------
Diluted weighted average EPS share quantity 145,093,553 97,214,418 239,027,734 97,214,418
*The closing market price of PGRA on June 30, 2009 was lower than the exercise
price of all outstanding options and warrants. Because of that, we assume that
none of the outstanding options or warrants at that date would have been
exercised and therefore none were included in the computation of diluted
earnings per share for periods ended June 30, 2009. Further, for the net-loss
periods we excluded any effect of outstanding options and warrants as their
effect would be anti-dilutive.
(7) Supplemental Cash Flow Information
During the nine months ended June 30, 2009, PlanGraphics paid $46,215 of
interest and nil for taxes. During the nine months ended June 30, 2008, the
Company paid $94,808 of Interest and $1,065 for taxes.
Non-cash transactions affecting cash flow computations during the nine-months
ending June 30, 2009, were:
o Payment of amounts due in liquidation of redeemable preferred stock
and accrued dividends which totaled $662,573.
o Fair value adjustment of $91,516 to certain liabilities in
discontinued operations.
o Cancellation of $7,414 of debt in discontinued operations.
(8) Foreign Currency Translation
Assets and liabilities of the Company's foreign subsidiary in discontinued
operations are translated at the rate of exchange in effect at the end of the
period. Net sales and expenses are translated at the actual rate of exchange
incurred for each transaction during the period. The total of all foreign
currency transactions and translation adjustments resulted in a net loss of
$60,463 during the nine-month period ended June 30, 2009.
(9) Provision for Income Taxes
At the beginning of this fiscal year we had net operating loss carryforwards of
$19.9 million with expirations through 2028. At June 30, 2009, the amount of the
net operating loss carryforward balance is estimated at $20.3 million. Since we
are unable to determine that deferred tax assets exceeding tax liabilities are
more likely than not to be realized, we have recorded a valuation allowance
equal to the net deferred tax assets at September 30, 2008 and at June 30, 2009.
As a result, no provision or benefit for income tax has been recorded for the
nine months ended June 30, 2009.
(10) Recently Issued Accounting Pronouncements
SFAS 107-1 and APB 28-1. In April 2009, the FASB issued Staff Position No. FAS
107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial
Instruments ("FSP FAS 107-1"). FSP FAS 107-1 amends SFAS No. 107, Disclosures
about Fair Value of Financial Instruments ("SFAS 107") to require disclosures
about fair value of financial instruments in interim reporting periods. Such
disclosures were previously required only in annual financial statements. FSP
FAS 107-1 is effective for interim reporting periods ending after June 15, 2009.
We adopted FSP FAS 107-1 in the third quarter of fiscal year 2009 and have
provided any additional disclosures required in Note 11.
SFAS 165. In May 2009, the FASB issued SFAS No. 165, Subsequent Events. SFAS No.
165 is intended to establish general standards of accounting for and disclosure
of events that occur after the balance sheet date but before financial
statements are issued or are available to be issued. It requires the disclosure
of the date through which an entity has evaluated subsequent events and the
basis for that date--that is, whether that date represents the date the
financial statements were issued or were available to be issued. SFAS No. 165 is
effective for interim and annual periods ending after June 15, 2009, and is to
be applied prospectively. We have adopted it as seen in Note 14.
11
SFAS 168. In June 2009, the FASB issued Statement of Financial Accounting
Standards No. 168 ("SFAS 168"), "The FASB Accounting Standards CodificationTM
and the Hierarchy of Generally Accepted Accounting Principles - a replacement of
FASB Statement 162." SFAS 168 provides for the FASB Accounting Standards
CodificationTM (the "Codification") to become the single official source of
authoritative, nongovernmental U.S. generally accepted accounting principles
("U.S. GAAP"). The Codification is not expected to change U.S. GAAP, but will
combine all authoritative standards into a comprehensive, topically organized
online database. The Company expects to adopt the use of the Codification for
the period ended September 30, 2009. This will have an impact on the Company's
financial statement disclosures, as all future references to authoritative
accounting literature will be referenced in accordance with the Codification.
(11) Fair Value
Fair Value Measurements. On October 1, 2008, the Company adopted SFAS No. 157,
Fair Value Measurements. SFAS No. 157 defines fair value, establishes a
framework for measuring fair value under generally accepted accounting
principles, and expands disclosures about fair value measurements. This
Statement applies under other accounting pronouncements that require or permit
fair value measurements, the Financial Accounting Standards Board having
previously concluded in those accounting pronouncements that fair value is a
relevant measurement attribute. Accordingly, this Statement does not require any
new fair value measurements. However, for some entities, the application of this
Statement will change current practices.
The following table sets forth the liabilities the Company has elected to record
at fair value under SFAS No. 157 as of June 30, 2009:
Fair Value Measurements at June 30, 2009
Using Significant Unobservable Inputs
Description (Level 3)
- -------------------------------------------------------------------------------
Current liabilities - discontinued operations:
Balance before fair value adjustment $ 3,346,090
Charge to accounts payable (91,516)
-----------
Balance after fair value charge $ 3,254,574
===========
The Company has antiquated legacy accounts payable balances in discontinued
operations that are at least four years old and some as old as ten years that it
believes will never require a financial payment for a variety of reasons.
Accordingly, under SFAS No. 157, (and in this case for our United Kingdom
subsidiary, Financial Reporting Standard 12, "Provisions, Contingent Liabilities
and Contingent Assets" ("FRS 12"), since this is where the balances are located)
the Company has analyzed the accounts and recorded a charge against those legacy
balances as permitted under FSR 12 in the United Kingdom reducing the balances
to the amount expected to be paid out. The income recorded during the nine
months ended June 30, 2009 was $91,516 and is recorded in other income from
discontinued operations on the Company's Consolidated Statement of Operations.
Fair Value of Financial Instruments. The carrying amounts of cash equivalents,
short-term investments, accounts receivable and accounts payable and accrued
expenses approximate fair value due to the short maturities of these items. The
carrying value of long-term investments, long-term debt and lease obligations
approximates fair value.
(12) Transactions Affecting Shareholders' Equity.
On January 14, 2009, PlanGraphics, Inc., entered into a business loan in the
amount of $30,000 with the holder of all of the outstanding Series A Preferred
Stock of PlanGraphics, Nutmeg/Fortuna Fund LLLP (the "Holder"), in the form of a
convertible debenture ("the Debenture"). The Debenture provides for an interest
rate of 6% per annum with a maturity date of February 28, 2009. Proceeds of the
Debenture were applied to certain critical working capital needs. The Debenture
is, in the event of default, convertible into common stock of the Company if the
default is not timely cured. The Debenture is convertible in whole or in part at
a conversion price on the date of conversion at the lesser of $0.002 per share
or fifty percent (50%) of the average closing price for the common stock on the
five trading days immediately prior to the conversion date. Conversion of the
Debenture into common stock of the registrant is limited and the Holder or its
affiliates, according to the terms of the Debenture agreement, may not be the
12
beneficial owner of more than 4.99% of the total number of shares of the
Company's common stock outstanding immediately after giving effect to the
issuance of shares permitted upon conversion by the Holder. Upon not less than
61 days notice to the Company, the Holder may increase or decrease this
limitation. The issue of the Debenture was reported on Form 8-K filed with the
SEC January 21, 2009. As of March 1, 2009, the Company is in default with regard
to the terms of the Debenture, and the Holder has the right to require the
Company to convert the amounts owing under the Debenture to common stock. The
Debenture will be liquidated concurrent with the pending merger transaction.
Issue of Common Stock. On May 29, 2009, in lieu of a cash payment, the Company
issued 401,559,467 shares of the Company's common stock (the number of shares
that the Company was required to issue in accordance with an agreed upon
formula) to Integrated Freight Systems Inc. ("IFSI"), a Florida corporation, to
satisfy our obligations for redemption of our Series A Redeemable Preferred
Stock and accrued unpaid dividends pursuant to the related Redemption Request.
The issuance resulted in a change in control of the Company, with IFSI owning
80.2% of the shares of common stock issued and outstanding after giving effect
to the issuance. The shares of Common Stock were issued in reliance on the
exemption from registration provided in Section 4(2) of the Securities Act. No
commissions or fees were paid in connection with the redemption. The
certificates representing the shares were issued with a restrictive legend.
(13) Results of Discontinued Operations
The discontinued operations of PGI-MD, our operating subsidiary, will continue
to fund our limited continuing operations until PGI-MD is sold and the pending
merger of PGRA into Integrated Freight are completed. Therefore we are providing
the financial position and the operating results for PGI-MD in the disclosures
below.
Statement of Financial Position - Discontinued Operations
June 30, September 30,
2009 2008
------------- ------------------
(Unaudited) (Derived from
audited financial
statements)
Cash and cash equivalents $ 1,164 $ 202
Accounts receivable, less allowances for doubful
accounts of $14,151 and $49,718 463,136 733,472
Prepaid expenses and other 24,150 20,405
Equipment and furniture net of accumulated depreciation
of $353,864 and $345,948 15,433 23,169
Software development costs, net of accumulated
amortization of $904,201 and $822,986 107,334 187,743
Other assets 6,642 8,016
Notes - payable current maturities (22,665) (34,982)
Notes payable to related parties (13,750) --
Accounts payable (2,771,198) (2,644,056)
Accrued payroll costs (206,697) (188,075)
Accrued expenses (126,488) (136,585)
Deferred revenue and prebillings (113,776) (312,303)
----------- -----------
Net liabilities of discontinued operations $(2,636,715) $(2,342,994)
=========== ===========
13
Discontinued Operations Income Statement
For the three and nine month periods ended June 30,
(Unaudited)
Nine months ended Three months ended
----------------------------- -----------------------------
2009 2008 2009 2008
----------- ----------- ----------- -----------
Revenues from discontinued operations $ 1,569,405 $ 2,942,492 $ 359,742 $ 872,437
Costs and expenses:
Direct contract costs 765,052 1,738,745 201,130 491,383
Salaries and employee benefits 648,025 774,290 190,582 239,641
General and administrative expenses 339,121 334,446 84,570 108,767
Marketing expenses 3,315 14,043 2,730 7,438
Other operating expenses 103,086 167,404 29,494 54,316
----------- ----------- ----------- -----------
Total costs and expenses 1,858,599 3,028,928 508,506 901,545
----------- ----------- ----------- -----------
Operating loss from discontinued operations (289,194) (86,436) (148,764) (29,108)
Other income and expense - discontinued operations:
Other income 127,139 63,365 3,533 19,985
Interest expense (42,773) (65,541) (6,843) (3,602)
----------- ----------- ----------- -----------
84,366 (2,176) (3,310) 16,383
----------- ----------- ----------- -----------
Loss from discontinued operations $ (204,828) $ (88,612) $ (152,074) $ (12,725)
=========== =========== =========== ===========
(14) Subsequent Events.
Subsequent events have been evaluated through August 13, 2009, one day prior to
the date these consolidated financial statements are being issued. The events
below required disclosure.
Stock Purchase Agreement. The Company has entered into a stock purchase
agreement that has an effective date of May 1, 2009. The agreement contemplates
the issue of shares of common stock to Integrated Freight in redemption of the
then outstanding Series A Redeemable Preferred Stock and accrued dividends which
has since then resulted in a change in control of PlanGraphics. Integrated
Freight, as the 80.2% majority stockholder of PlanGraphics, has demanded a
special shareholders' meeting at which the stockholders of PlanGraphics are
expected to approve the spin-off of PGI-MD to John Antenucci, our chief
executive officer; a reverse stock split; and a merger of PlanGraphics into
Integrated Freight. The merger is a statutory merger under both Colorado and
Florida corporate law. The stock purchase agreement is filed with this report as
Exhibit 2.1.
Convertible Promissory Note. On July 16, 2009, the Company entered into a
business loan in the amount of $20,000 with an unrelated entity, Tangiers
Investors LP (the "Holder"), in the form of a convertible promissory note ("the
Note"). The Note provides for an interest rate of 8% per annum with a maturity
date of January 15, 2010. The note bears interest at 8% per annum and has a
maturity date six months from the date of issue at which time the accrued
interest is due. Default rate of interest is 15% if the note is not cured within
20 days of maturing. The Holder of the note has the right to convert the
principal amount into common stock of the Company at 65% of the three lowest
volume weighted average prices of the Company's common stock during the 10 day
trading period preceding the conversion notice. Any shares that may be issued
pursuant to the promissory note are issuable only if an effective registration
statement is available to cover the shares or if an exemption from registration
is available under Rule 144 of the 1933 Act. Proceeds of the Note were applied
to certain working capital needs.
14
ITEM 2. MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Executive Summary of PlanGraphics, Inc.
Historically PlanGraphics has been a full life-cycle systems integration and
implementation firm, providing through its operating subsidiary a broad
range of services in the design and implementation of information technology
related to spatial information management in the public and commercial
sectors.
As a result of the pending spin off of our operating subsidiary PGI-MD and
the pending merger of PGRA into Integrated Freight, we have reclassified our
financial records to disclose results by continuing operations for PGRA and
discontinued operations for PGI-MD as required by SFAS 144. PGI-MD is now
considered and asset held for sale and therefore reported as discontinued
operations. In view of this reclassification, during the nine month period
ended June 30, 2009, the Company's continuing operations consisted of
primarily of satisfying continuous public disclosure requirements and
seeking to identify prospective buyers for our operating subsidiary.
The Company has been funded in recent years from equity placements, revenue
from discontinued operations, and loans from officers and employees. All
such capital raised or revenue realized was allocated to working capital for
application to costs and expense, general and administrative costs, interest
expense, and software development costs.
Management's Plan for PlanGraphics, Inc.
Management's Plan for PlanGraphics, Inc. PlanGraphics has experienced declining
revenues in the past several years. The costs for audits, legal advice and other
items related to the Company's SEC reporting and maintaining its status as a
public company are significant and are having an adverse effect on our ability
to successfully operate our core business. Based on this combination of
declining revenues and increasing costs, in 2003, the Company's Board of
Directors began examining strategic alternatives for PlanGraphics and retained a
number of specialist investment banking firms to assist with this process.
Through these efforts, and in parallel with efforts to maintain and build on our
traditional lines of business, the Board has concluded that in order to provide
shareholders with some opportunity for achieving value on their investment
PlanGraphics needs to aggressively pursue the option of deriving value from one
or more of the assets of the corporation. One such option that the Company has
pursued in recent years is the spin-off of PGI-MD and the sale of PlanGraphics,
the public entity, to a private company interested in becoming a publicly traded
corporation.
Recently, the Nutmeg Group, an investment banking entity that originally
purchased $500,000 of our Series A Redeemable Preferred Stock in 2006, presented
the Company with such a private company, Integrated Freight Systems Inc., having
a desire to become a publicly traded company. Shortly thereafter, Integrated
Freight purchased the preferred stock and accrued dividends from Nutmeg.
The Company has issued 401,559,467 shares of its common stock in satisfaction of
the redemption payment obligations for its outstanding Series A Redeemable
Preferred Stock to Integrated Freight Systems, Inc., who had purchased the
preferred stock from the Nutmeg Group. The issue of these shares resulted in a
change in control of PlanGraphics. Integrated Freight, as the 80.2% majority
stockholder of PlanGraphics, has demanded a special shareholders' meeting at
which the stockholders of PlanGraphics are expected to approve the spin-off of
PGI-MD to John Antenucci, our chief executive officer; a reverse stock split;
and a merger of PlanGraphics into Integrated Freight. The merger is a statutory
merger under both Colorado and Florida corporate law. See also Note 14,
Subsequent Events.
15
Financial Condition
The following discussion of liquidity and capital resources addresses our
requirements and sources as of June 30, 2009 and should be read in conjunction
with the accompanying unaudited consolidated interim financial statements and
the notes to those statements appearing elsewhere in this report and our audited
consolidated financial statements and the notes thereto for the year ended
September 30, 2008, appearing in our FY 2008 Form 10-KSB. Readers should take
into account the auditor's going concern statement as well as the liquidity
caution appearing in Note B of the September 30, 2008 financial statements. The
Company's cash needs for continuing operations have historically been met by
funds provided by its operating subsidiary which is now reclassified into
discontinued operations.
Cash Flow
The accompanying consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. During fiscal years 1998
through 2008, we experienced significant losses with corresponding reductions in
working capital and net worth, excluding the impact of certain one time gains.
Our revenues and backlog have also decreased substantially during the past two
years. We have struggled to maintain a minimal cash flow necessary to meet our
barebones operating and capital requirements and have been be forced to restrict
operating expenditures to match available resources. These factors, among
others, raise substantial doubt about our ability to continue as a going
concern.
We continue to experience significant liquidity issues that cause us to finance
the needed resources with funds from now discontinued operations and accretion
of amounts owed to creditors. As a result, from time to time we have delayed
payment of subcontractor invoices. As of June 30, 2009, we had a net working
capital deficit of ($3,110,057) compared with a net working capital deficit of
($3,469,474) at September 30, 2008.
Cash provided by operations. In the nine months ended June 30, 2009, operations
used net cash of $35,472, as compared to $159,424 provided by operations during
the period ended June 30, 2008. This $194,896 change from the prior year was
primarily a result of:
A decrease of $104,150 in cash used to fund our current year net loss of
$392,687 versus $288,537 for the prior year plus a net change of $22,516 for
changes in operating assets and liabilities of continuing operations which
decreased the cash used, plus a decrease of $113,262 in cash provided by
discontinued operations. The latter decrease was a result of gains from
extinguishments of debt and from the application of fair value accounting to
certain aged payables.
Cash used by investing activities. In the period ended June 30, 2009, investing
activities used cash of $806 versus $62,308 used in investing activities during
the period ended June 30, 2008. The primary reason for the change was decreased
purchases of software for future use in the current period. All activity was
from discontinued operations.
Cash provided by and used in financing activities. During the period ended June
30, 2009, financing activities provided $37,127 as compared to net cash used of
$174,677 in financing activities in the period ended June 30, 2008. The change
was mainly a result of proceeds received from the issue of a convertible
debenture in continuing operations and a related party note payable in
discontinued operations versus the paydown of debt in discontinued operations in
the prior year period.
Accounts receivable balances at June 30, 2009 and 2008, have been reclassified
in the current presentation to "current assets of discontinued operations" on
our balance sheets.
The parent company depends on revenues and accounts receivable collections by
discontinued operations to fund the administration of the parent company pending
completion of the merger with Integrated Freight. Therefore the elevated levels
of aged accounts receivable we experience periodically, coupled with the need to
finance activities with cash from discontinued operations, places cash flow
constraints on the Company requiring it to very closely manage its expenses and
payables. From time to time we have also borrowed funds from officers and
employees to meet working capital needs.
16
Capital Resources
On January 14, 2009, PlanGraphics, Inc., entered into a business loan in the
amount of $30,000 with the holder of all of the outstanding Series A Preferred
Stock of PlanGraphics, Nutmeg/Fortuna Fund LLLP (the "Holder"), in the form of a
convertible debenture ("the Debenture"). The Debenture provides for an interest
rate of 6% per annum with a maturity date of February 28, 2009. Proceeds of the
Debenture were applied to certain critical working capital needs. The Debenture
will be, in the event of default, convertible into common stock of the Company
if the default is not timely cured. The Debenture will be convertible in whole
or in part at a conversion price on the date of conversion at the lesser of
$0.002 per share or fifty percent (50%) of the average closing price for the
common stock on the five trading days immediately prior to the conversion date.
Conversion of the Debenture into common stock of the registrant is limited and
the Holder or its affiliates, according to the terms of the Debenture agreement,
may not be the beneficial owner of more than 4.99% of the total number of shares
of the Company's common stock outstanding immediately after giving effect to the
issuance of shares permitted upon conversion by the Holder. Upon not less than
61 days notice to the Company, the Holder may increase or decrease this
limitation. The issue of the Debenture was reported on Form 8-K filed with the
SEC January 21, 2009. As of March 1, 2009, the Company is in default with regard
to the terms of the Debenture, and the Holder has the right to require the
Company to convert the amounts owing under the Debenture to common stock.
While we had a workable factoring arrangement and we have previously raised
funds from the sale of redeemable preferred stock and the issue of a convertible
debenture, our operations have continued to be severely impacted by liquidity
issues and the contracting US economy during this reporting period; we expect
that to continue through the end of calendar year 2009.
The backlog and assignments as of June 30, 2009, for our discontinued operations
amount to approximately $527,309, of which approximately $464,000 is funded. The
decrease in backlog and assignments over the past two years was caused by the
natural drawdown of multi-year contracts, suspension and cancellation of some
assignments as an outcome of declining client budgets and an overall reduction
of project opportunities in the current recessionary business environment.
Congress recently passed the American Recovery and Reinvestment Act of 2009
("the Bill") which is intended to inject about $800 billion into the United
States' economy. While it is premature to predict exactly how the passage of the
Bill may impact the spending patterns of state and local governments,
particularly in the IT and GIS arenas, passage of the Bill and implementation of
its programs is expected to have a positive effect on our operating subsidiary's
primary customers' capacity to restore funding to existing long-term contracts
and to develop and fund new projects for which our services would be required.
Tangible evidence of expanded purchasing by our traditional customer base has
yet to be established and the prospects for maintaining even the status quo
appear to be quite limited.
Results of Operations
Results of operations for the three months ended June 30, 2009
Revenues
With the reclassification assigning financial results to continuing operations
and discontinued operations we are not reporting revenue here because none is
generated by our continuing operations.
Costs and Expenses -Continuing Operations
Total costs and expenses for the quarter ended June 30, 2009 amounted to
$61,300, a $9,090 increase over the $52,210, for the quarter ended June 30,
2008. This 17% increase is primarily due to increased general and administrative
costs.
Salaries and benefits decreased by approximately $3,517, or 19%, as a result
management's decision to reduce the work week to 32 hours pending receipt of new
contracts. General and administrative expenses increased $12,607, or 37%,
primarily as a result of increased legal costs related to the pending merger
transaction.
17
Operating Loss from Continued Operations
We reported an operating loss from continuing operations of $61,300 for the
quarter ended June 30, 2009, as compared to an operating loss of $52,210 in the
prior year. This decrease is primarily attributable to increased general and
administrative costs.
Interest expense increased $3,241, or 90%, from the prior year period as a
result of dividend expense accrual terminating when we redeemed the Series A
Preferred Stock and accrued dividends with the issue of common stock.
Loss from continuing operations increased $1,977, or 3%, as a result of the
above.
Discontinued operations experienced an increase in operating losses of $119,656,
or 411%, primarily as a result of a $512,695 decrease in revenues; the $393,039
decrease in total costs and expenses was insufficient to offset the decrease in
revenues.
Other income and expense from discontinued operations experienced a decrease of
$19,493 from the prior year period resulting in a loss from discontinued
operations of $152,074.
The Company is reporting a net loss of $221,220 for the current year period
compared with the prior year period's loss of $79,894. The $141,326 increase in
net loss stems primarily from reduced revenue in discontinued operations and
from the other items noted above.
Results of operations for the nine months ended June 30, 2009
Revenues
As noted above, our continuing operations do not generate revenue and,
accordingly, we are not reporting revenues.
Costs and Expenses from Continuing Operations
Total costs and expenses for the nine months ended June 30, 2009, amounted to
$149,552, a $5,329 reduction from $154,881 for the same period ended June 30,
2008. This 3% decrease is primarily due reductions in salaries and benefits.
Salaries and benefits decreased by $5,868, or 11% as a result of the decision to
change to a four day workweek. General and administrative expenses increased by
$994 primarily as a result of increased legal fees related to the pending merger
transaction; and, finally, marketing expense decreased $455.
Operating loss from continuing operations decreased $5,329, or 3%, as a result
of the above items.
Interest expense amounted to $38,307 in the current nine month period compared
with $45,041 during the same period of the prior year; the decrease of $6,734,
or 15%, occurred because the redemption of outstanding preferred stock caused
further accrual of related dividends to cease.
Loss from continuing operations amounted to $187,859 in the current year period
compared to $199, 922 in the prior year. The 6% decrease resulted from the items
noted above.
Discontinued operations incurred an operating loss of $289,194 in the current
period versus an operating loss of $86,436 in the prior year period. The
$202,758 increase resulted primarily from a decrease of $1,373,087 in revenues;
the decrease of $1,171,329 in total costs and expenses was insufficient to
offset the drop in revenue. While direct contract costs decreased 56%, salaries
and employee benefits decreased only 14%.
Other income and expenses from discontinued operations amounted to income of
$84,366 in the current year versus an expense of $2,176 in the prior year. The
primary cause was income recognized from the applications of fair value
accounting to certain aged payables.
18
Loss from discontinued operations for the current year amounted to $204,828
versus $88,612 in the prior year.
Net loss for the Company in the current year period is $392,687 versus $288,534
in the prior year. The $104,153 increase resulted from the items noted above.
Income Taxes and Deferred Tax Valuation Allowance -- FY 2009
We reported net loss of $392,687 for the nine months ended June 30, 2009.
Coupled with losses in prior years, we have generated a sizeable federal tax net
operating loss, or NOL, carryforward which totals approximately $20.3 million as
of June 30, 2009, compared to $19.9 million at September 30, 2008. We have
established a 100% valuation allowance on the net deferred tax asset arising
from the loss carryforwards in excess of the deferred tax liability. The
valuation allowance has been recorded as our management has not been able to
determine that it is more likely than not that the deferred tax assets will be
realized. As a result, no provision or benefit for federal income taxes has been
recorded for the period ended June 30, 2009.
Critical Accounting Policies and Estimates
We do not have any updates to the Critical Accounting Policies disclosed in Item
6, Part Two of our Annual Report on Form 10-KSB for September 30, 2008 and filed
with the SEC.
ITEM 4. CONTROLS AND PROCEDURES
Inherent limitations of Control Systems
We maintain appropriate internal controls and disclosure controls, and related
procedures, that are designed to ensure that financial and other information
required to be disclosed in the Company's Exchange Act reports is recorded,
processed, summarized and reported promptly and properly to meet the current
requirements. Such controls and procedures, no matter how well designed and
operated, may have inherent limitations in a cost-effective control system, and
therefore misstatements due to error or fraud may occur and not be detected. See
the expanded discussion in Item 8A of Part Two in our Form 10-KSB for September
30, 2008, in which we identified a number of deficiencies and material
weaknesses in the Companies internal controls over financial reporting; those
findings continue to exist as of the end of this reporting period.
Evaluation of Disclosure Controls and Procedures
Based on their most recent evaluation, which was completed as of the end of the
period covered by this report, and subject to the limitations above, both the
company's Chief Executive Officer and Senior Financial Officer believe that our
disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and
15d-14) are effective in timely alerting management to material information
required to be included in this Form 10-Q and other Exchange Act filings for
timely disclosure.
Evaluation of Internal Controls over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal
control over financial reporting that includes effective accounting policies and
procedures as well as staffing.
We previously reported material weaknesses in internal control over financial
reporting resulting from inadequate staffing due to the typical resource
limitations inherent in small companies. The specific material weaknesses were
identified by management as of September 30, 2008 and described in our FY 2008
Form 10-KSB for that year in Item 8A of Part II. Because we do not have the
financial resources to immediately increase our accounting staff, those material
weaknesses and deficiencies continue to exist as of the end of the period
covered by this quarterly report.
While management has concluded that we continue to have material weaknesses
related to internal control over financial reporting, we have devoted a
significant amount of time and resources to the analysis of the financial
statements presented in this Quarterly Report on Form 10-Q for the fiscal period
ended March 31, 2009. Accordingly, management believes that the financial
statements included in this report fairly present in all material respects, our
financial condition, results of operations and cash flows.
19
Changes in Internal Controls
Based upon their most recent evaluation which was completed as of the end of the
period covered by this report, and subject to the limitations above, both our
Chief Executive Officer and Senior Financial Officer concluded that, except for
the departure of a clerk from accounting and the financial officer from our
subsidiary company, there was no significant change in our internal controls
over financial reporting that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.
Our independent registered public accounting firm will be required to attest to
the accuracy of management's evaluation report. The requirement is effective
with our fiscal year ending September 30, 2010.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Subcontractor Claim. On December 22, 2008, a subcontractor, Sanborn Map Company,
Inc. ("Sanborn"), asserted in a summons filed in the District Court for Douglas
County, Colorado, that it was entitled to recover an outstanding amount of
$896,475 plus certain unpaid retainage of $18,501 earned for work as a
subcontractor to the Company's operating subsidiary, PlanGraphics of Maryland.
All amounts had been previously recorded in the Company's financial records. The
case was moved to the U.S. District Court for the District of Colorado (case #
09-cv-0332-RPM). The Company is aggressively defending its interests and has
challenged the fees sought. As a result, the Company recently entered into
settlement conferences and mediation with Sanborn during July 2009.
Item 1A. Risk Factors
In addition to the other information set forth in this report, you should
carefully consider the factors discussed under the heading "Risk Factors" in our
Annual Report on Form 10-KSB filed on January 21, 2009, which could materially
affect our business operations, financial condition or future results.
Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial also may materially adversely affect our
business operations and/or financial condition. Other any risks associated with
the pending transaction with Integrated Freight as described herein and as
referenced in the filing of the S-4 registration statement by Integrated
Freight, There have been no material changes to our risk factors since the
filing of our Form 10-KSB.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
The Company issued 401,559,467 shares of its common stock on May 29, 2009, to
Integrated Freight. The shares of Common Stock were issued in reliance on the
exemption from registration provided in Section 4(2) of the Securities Act of
1933. We issued the shares in lieu of making a cash payment for redemption of
our outstanding Series A Redeemable Preferred Stock and related accrued
dividends. No commissions or fees were paid in connection with the redemption.
The certificates representing the shares were issued with a restrictive legend.
On July 16, 2009, we issued a Convertible Promissory Note in exchange for a
business loan of $20,000 borrowed from an unrelated entity. The Promissory Note
requires that any shares issued pursuant to the note be covered by an effective
registration statement or a valid exemption to Rule 144. If neither is
available, we will rely upon Section 4(2) of the Securities Act of 1933 for the
issue of any shares should the Promissory Note be converted into common stock;
the certificates will contain a restrictive legend.
ITEM 6. EXHIBITS.
(a) Exhibits:
Exhibit 2.1, Form of Stock Purchase Agreement, effective May 1, 2009, by
PlanGraphics, Inc. et al, and filed on page 23 of this report,
Exhibit 4.1, Convertible Promissory Note dated July 16, 2009, by PlanGraphics,
Inc., and filed on page 28 of this report.
Exhibit 31.1, Section 302 Certification for the principal executive officer,
dated May 20, 2009, and filed on page 35 of this report.
20
Exhibit 31.2, Section 302 Certification for the principal financial officer,
dated May 20, 2009, and filed on page 36 of this report.
Exhibit 32.1, Sarbanes-Oxley Section 906 Certification for Chief Executive
Officer, dated May 20, 2009, and filed on page 37 of this report.
Exhibit 32.2, Sarbanes-Oxley Section 906 Certification for principal financial
officer, dated May 20, 2009, and filed on page 38, of this report.
21
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
PLANGRAPHICS, INC .
Dated: August 14, 2009
/S/ Fred Beisser
Frederick G. Beisser
Senior Vice President-Finance,
Secretary & Treasurer
(Principal financial and accounting officer)
22