-----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, AHFsVt8piyINdJOBq2yDpyBkGT3sggJv9xzJ1Tzry7rIOlqHRmQ6G5AJncTIy/Kk hMTTG88KDuTwwejhUrQ83Q== 0000890163-05-000445.txt : 20050831 0000890163-05-000445.hdr.sgml : 20050831 20050831172304 ACCESSION NUMBER: 0000890163-05-000445 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20050831 DATE AS OF CHANGE: 20050831 GROUP MEMBERS: PAUL J. SOLIT GROUP MEMBERS: POTOMAC CAPITAL MANAGEMENT , INC GROUP MEMBERS: POTOMAC CAPITAL MANAGEMENT LLC SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: INTEGRATED ALARM SERVICES GROUP INC CENTRAL INDEX KEY: 0001200022 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MISCELLANEOUS BUSINESS SERVICES [7380] IRS NUMBER: 421578199 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-79619 FILM NUMBER: 051062658 BUSINESS ADDRESS: STREET 1: CAPITAL CENTER, 99 PINE STREET STREET 2: 3RD FLOOR CITY: ALBANY STATE: NY ZIP: 12207 BUSINESS PHONE: 5184261515 MAIL ADDRESS: STREET 1: CAPITAL CENTER, 99 PINE STREET STREET 2: 3RD FLOOR CITY: ALBANY STATE: NY ZIP: 12207 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: POTOMAC CAPITAL MANAGEMENT LLC CENTRAL INDEX KEY: 0001233369 IRS NUMBER: 133984298 STATE OF INCORPORATION: DE FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 153 E. 53RD STREET CITY: NEW YORK STATE: NY ZIP: 10022 SC 13D 1 s11-5652_13d.txt SCHEDULE 13D SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ------------- SCHEDULE 13D (RULE 13D-101) INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT TO 13D- 1(A) AND AMENDMENTS THERETO FILED PURSUANT TO 13D-2(A) (AMENDMENT NO. ) INTEGRATED ALARM SERVICES GROUP, INC. - -------------------------------------------------------------------------------- (Name of Issuer) COMMON STOCK, PAR VALUE $.001 PER SHARE - -------------------------------------------------------------------------------- (Title of Class of Securities) 45890M109 - -------------------------------------------------------------------------------- (CUSIP Number) Jay Weil, Esq. Guzov Ofsink, LLC 600 Madison Avenue, 14th Floor New York, New York 10022 Tel. No. (212) 371-8008 - -------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) August 31, 2005 - -------------------------------------------------------------------------------- (Date of Event Which Requires Filing of This Statement) - -------------------------------------------------------------------------------- If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of ss.ss. 240.13d-1(e), 240.13d-1(f) or 240.13d-1 (g), check the following box. [X] Note. Six copies of this statement, including all exhibits, should be filed with the Commission. See Rule 13d-1 (a) for other parties to whom copies are to be sent. (Continued on the following pages) (Page 1 of 13 Pages) CUSIP NO. 45890M109 13D PAGE 2 OF 13 PAGES 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Potomac Capital Management LLC 13-3984298 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS* AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) / / 6 CITIZENSHIP OR PLACE OF ORGANIZATION New York NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY EACH 8 SHARED VOTING POWER REPORTING 987,567 PERSON WITH 9 SOLE DISPOSITIVE POWER 0 10 SHARED DISPOSITIVE POWER 987,567 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 987,567 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 4.00% 14 TYPE OF REPORTING PERSON* HC; OO (limited liability company) *SEE INSTRUCTIONS BEFORE FILLING OUT! CUSIP NO. 45890M109 13D PAGE 3 OF 13 PAGES 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Potomac Capital Management, Inc. 13-3984786 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS* AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) / / 6 CITIZENSHIP OR PLACE OF ORGANIZATION New York NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY EACH 8 SHARED VOTING POWER REPORTING 950,600 PERSON WITH 9 SOLE DISPOSITIVE POWER 0 10 SHARED DISPOSITIVE POWER 950,600 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 950,600 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 3.85% 14 TYPE OF REPORTING PERSON* HC; CO *SEE INSTRUCTIONS BEFORE FILLING OUT! CUSIP NO. 45890M109 13D PAGE 4 OF 13 PAGES 1 NAMES OF REPORTING PERSONS I.R.S. IDENTIFICATION NOS. OF ABOVE PERSONS (ENTITIES ONLY) Paul J. Solit 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) / / (b) / / 3 SEC USE ONLY 4 SOURCE OF FUNDS* AF 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) or 2(e) / / 6 CITIZENSHIP OR PLACE OF ORGANIZATION United States of America NUMBER OF 7 SOLE VOTING POWER SHARES BENEFICIALLY 0 OWNED BY EACH 8 SHARED VOTING POWER REPORTING 1,348,467 PERSON WITH 9 SOLE DISPOSITIVE POWER 0 10 SHARED DISPOSITIVE POWER 1,348,467 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON 1,348,467 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 5.46% 14 TYPE OF REPORTING PERSON* HC; IN *SEE INSTRUCTIONS BEFORE FILLING OUT! ITEM 1. SECURITY AND ISSUER. (a) This Statement on Schedule 13D relates to the common stock, par value $.001 per share (the "Common Stock"), of Integrated Alarm Services Group, Inc., a Delaware corporation (the "Company"). (b) The principal executive offices of the Company are located at One Capital Center, 99 Pine Street, 3rd Floor, Albany, New York 12207. ITEM 2. IDENTITY AND BACKGROUND. (a) This Statement on Schedule 13D is being jointly filed by Potomac Capital Management LLC, A New York limited liability company (Potomac LLC"), Potomac Capital Management Inc., a New York corporation ("Potomac Inc."), and Paul J. Solit ("Solit" and collectively with Potomac LLC and Potomac Inc., the "Reporting Persons"). (b) The business address of each of the Reporting Persons is 153 E. 53rd Street, 26th Floor, New York, New York 10022. (c) Potomac Inc. is the investment manager of each of Potomac Capital Partners LP, a Delaware limited partnership ("Potomac Partners") and Potomac Capital International Ltd., a British Virgin Islands international business company ("Potomac International"), none of which entities is a Reporting Person, but which entities directly own an aggregate of 950,600 shares of Common Stock. By virtue of its power to direct the acquisition and disposition of such Common Stock, Potomac Inc. may be deemed to beneficially own all of the Common Stock owned by Potomac Partners and Potomac International. Potomac LLC is the general partner of Potomac Partners and the investment manager of Pleiades Investment Partners-R, a Delaware limited partnership ("Pleiades"), which is not a Reporting Person. Potomac LLC shares the power to vote, acquire and dispose of the shares of Common Stock held by Potomac Partners and Pleiades and therefore may be deemed to beneficially own an aggregate of 987,567 shares of Common Stock directly owned by Potomac Partners and Pleiades. Solit is the Managing Member of Potomac LLC, the President and sole owner of Potomac Inc., and a director of Potomac International and by virtue of such relationships may be deemed to beneficially own all of the Common Stock beneficially owned by each of Potomac LLC and Potomac Inc., as well as Potomac Partners, Potomac International and Pleiades. (d)-(e) During the last five years, none of the Reporting Persons has been convicted in any criminal proceeding (excluding traffic violations or similar misdemeanors) nor during that time has any of the Reporting Persons been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction which resulted in a judgment, decree or final order enjoining the Reporting Person from future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or any finding of any violation with respect to such laws. (f) Each of Potomac LLC and Potomac Inc. is organized under the laws of New York. Solit is a citizen of the United States of America. 5 ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. The shares of the Company's Common Stock acquired by the Reporting Persons were acquired during the period from July 24, 2003 to August 30, 2005 in open market purchases from the working capital of the entities making the purchases. ITEM 4. PURPOSE OF TRANSACTION. The Reporting Persons acquired all of the shares of Common Stock reported herein as beneficially owned by them for investment purposes only. By letter, dated August 31, 2005, a copy of which is filed herewith as Exhibit 2, Potomac LLC expressed its concern that the Board of Directors of the Company had not yet acted to authorize a share repurchase agreement, despite management's previous public comments regarding the benefit of such a program. In the letter Potomac LLC urged the Board of Directors to undertake the share repurchase program. Except as set forth herein, no Reporting Person has any plans or proposals which would relate to or result in: (a) The acquisition by any person of additional securities of the Company, or the disposition of securities of the Company; (b) An extraordinary corporate transaction, such as a merger, reorganization or liquidation, involving the Company or any of its subsidiaries; (c) A sale or transfer of a material amount of assets of the Company or any of its subsidiaries; (d) Any change in the present board of directors or management of the Company, including any plans or proposals to change the number or terms of directors or to fill any existing vacancies on the board; (e) Any material change in the present capitalization or dividend policy of the Company; (f) Any other material change in the Company's business or corporate structure; (g) Changes in the Company's charter, by-laws or instruments corresponding thereto or other actions which may impede the acquisition of control of the Company by any person; (h) Causing a class of securities of the Company to be delisted from a national securities exchange or to cease to be authorized to be quoted in an inter-dealer quotation system of a registered national securities association; 6 (i) A class of equity securities of the Company becoming eligible for termination of registration pursuant to Section 12(g)(4) of the Securities Exchange Act of 1934, as amended; or (j) Any action similar to any of those enumerated above. Each of the Reporting Persons reserves the right from time to time to acquire or dispose of shares of Common Stock, or to formulate other purposes, plans or proposals regarding the Company or securities of the Company held by such Reporting Person to the extent deemed advisable in light of general investment policies, market conditions and other factors. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER. (a) As of the date hereof, the Reporting Persons may be deemed to beneficially own the number of shares of the Company's Common Stock representing the percentage of the Company's outstanding common stock set forth opposite the name of the Reporting Person below: Name of Number of Shares Percentage Reporting Person Beneficially Owned of Outstanding Stock ---------------- ------------------ -------------------- Potomac LLC 987,567 4.00% Potomac Inc. 950,600 3.85% Solit 1,348,467 5.46% (b) Each of the above Reporting Persons shares the power to vote or to direct the vote of, and the power to dispose or direct the disposition of all of the shares reported as beneficially owned by such Reporting Person (c) No transactions in the Common Stock were effected during the past sixty days by any of the Reporting Persons, except as follows: 7
- ----------------------- --------------------- -------------------- --------------------- -------------------- Transaction Date Name of Entity Type of Transaction Number of Shares Total Purchase or Making Purchase or Sales Price Sale - ----------------------- --------------------- -------------------- --------------------- -------------------- August 9, 2005 Potomac Partners Sale 500 $2,189.90 - ----------------------- --------------------- -------------------- --------------------- -------------------- August 11, 2005 Potomac Partners Purchase 2,900 $10,665.25 - ----------------------- --------------------- -------------------- --------------------- -------------------- August 11, 2005 Pleiades Purchase 11,900 $43,717.75 - ----------------------- --------------------- -------------------- --------------------- -------------------- August 11, 2005 Potomac Purchase 5,200 $19,112.00 International - ----------------------- --------------------- -------------------- --------------------- -------------------- August 12, 2005 Potomac Partners Purchase 1,500 $5,383.80 - ----------------------- --------------------- -------------------- --------------------- -------------------- August 12, 2005 Potomac Purchase 2,200 $7,889.24 International - ----------------------- --------------------- -------------------- --------------------- -------------------- August 15, 2005 Potomac Partners Purchase 100 $373.00 - ----------------------- --------------------- -------------------- --------------------- -------------------- August 16, 2005 Potomac Partners Purchase 2,400 $8,607.00 - ----------------------- --------------------- -------------------- --------------------- -------------------- August 16, 2005 Pleiades Purchase 1,600 $5,743.00 - ----------------------- --------------------- -------------------- --------------------- -------------------- August 16, 2005 Potomac Purchase 1,000 $3,595.00 International - ----------------------- --------------------- -------------------- --------------------- -------------------- August 30, 2005 Potomac Partners Purchase 2,500 $10,215.00 - ----------------------- --------------------- -------------------- --------------------- -------------------- August 30, 2005 Potomac Purchase 2,000 $8,175.00 International - ----------------------- --------------------- -------------------- --------------------- --------------------
(d) Not applicable. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER. None 8 ITEM 7. MATERIAL TO BE FILED AS EXHIBITS. 1. Joint Filing Agreement among the Reporting Persons, dated August 31, 2005.* 2. Letter, dated August 31, 2005, from Potomac Capital Management, LLC to the Board of Directors of the Company.* *Filed herewith 9 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, the undersigned certifies that the information set forth in this statement is true, complete and correct. August 31, 2005 ----------------- (Date) /s/ Paul J. Solit ----------------- Paul J. Solit POTOMAC CAPITAL MANAGEMENT LLC By: /s/ Paul J. Solit ------------------------ Paul J. Solit, Managing Member POTOMAC CAPITAL MANAGEMENT INC. By: /s/ Paul J. Solit ------------------------ Paul J. Solit, President 10 EX-99 2 s11-5652_ex1.txt EXHIBIT 1 Exhibit 1 JOINT FILING AGREEMENT In accordance with Rule 13d-1(k) under the Securities Exchange Act of 1934, as amended, the persons named below agree to the joint filing on behalf of each of them of a Statement on Schedule 13D (including amendments thereto) with respect to the common stock of Integrated Alarm Services Group, Inc. and further agree that this Joint Filing Agreement be included as an Exhibit to such joint filings. In evidence thereof the undersigned, being duly authorized, hereby execute this Agreement this 31st day of August, 2005. /s/ Paul J. Solit ----------------- Paul J. Solit POTOMAC CAPITAL MANAGEMENT LLC By: /s/ Paul J. Solit ------------------------ Paul J. Solit, Managing Member POTOMAC CAPITAL MANAGEMENT INC. By: /s/ Paul J. Solit ------------------------ Paul J. Solit, President 11 EX-99.N 3 s11-5652_ex2.txt EXHIBIT 2 Exhibit 2 [LOGO] [PCM] - ------------ Potomac Capital Management, LLC Citigroup Center 153 East 53rd Street, 26th Floor New York, NY 10022 August 31, 2005 Board of Directors of Integrated Alarm Services Group, Inc. c/o Timothy McGinn One Capital Center 99 Pine Street, 3rd Floor Albany, NY 12207 Via Email To the Members of the Board of Directors: My name is P.J. Solit and I am the President of Potomac Capital Management, the investment manager of a group of investment partnerships that collectively own 5.5% of Integrated Alarm Services Group, Inc. I am writing to express our concern that the board has not yet acted to authorize a share repurchase program. We believe a share repurchase makes sense from both a financial viewpoint as well as from a qualitative, or signaling, point of view. Financially, given that the shares are trading a 43-50% percent discount to what we believe is a current liquidation value of $7.00 to $8.00, the case for value creation is quite clear. On a qualitative level, even a small repurchase would indicate the board's confidence in the future of the business. This is no small matter in light of the 4.8 million shares which have been sold short, and which have clearly placed their bets regarding the future direction of the business. In various conversations with Management over the past several months, we believed they shared our view regarding the benefit of a repurchase program. In fact on the June 15th conference call Tim McGinn stated: "I WILL ALSO MENTION THAT, AND I'VE SAID THIS BEFORE, THAT RIGHT NOW, THE CHEAPEST PLACE TO BUY ACCOUNTS IN THE MARKET IS UNDER THE SYMBOL IASGE. AND CERTAINLY, OUR BOARD IS COGNIZANT OF THAT...I WILL RECOMMEND TO THE BOARD, THAT WE REPURCHASE THE NUMBER OF SHARES THAT WE CAN, GIVEN THE INDENTURE AND THE LIMITATIONS THAT WE HAVE WITH OUR SENIOR NOTE HOLDERS." 12 On the June 29th conference call, I personally asked about the remaining impediments to a share buyback program and management's answer seemed to imply that the window would open August 12th. Given management's statements, we must conclude that the hesitancy resides at the board level. Our guess is that the board's hesitancy results from the view that the company does employ some financial leverage and is not currently GAAP profitable. While these are not unreasonable views, we believe this stance is overly conservative given that the company does generate cash from operations (prior to acquisitions), there is available liquidity from the $24.5 million in cash (as of 2Q'05), the $30 million bank line, and the $17.7 million note the company holds, which is easily saleable if necessary. Even so, we are not advocating leveraging the company to the point that it endangers future viability. Rather, we envision starting small, with perhaps the $2.5 million that is currently allowed by the debt covenants, an amount which management had previously publicly stated it intended to use for repurchase. Beyond that initial amount, should the shares not respond to future fundamental improvements in terms of profitability or balance sheet progress, further repurchases could always be considered versus alternative uses of cash. In this regard, we point out that buying your own shares at current valuations implies roughly a "low 20's" multiple of RMR for the retail business (assuming a value of $50 million for the Commercial business), thus representing a more compelling and certainly a lower risk alternative than going out and paying 35x RMR for an unfamiliar account base. We are certainly in favor of acquisitions of new contracts at lower multiples, or any other value enhancing actions that would push the company toward significant profitability, but we simply want to make the point that these actions are not mutually exclusive with a nominal amount of share repurchase. I would hope that the board would have the foresight to look beyond the current negative stock market sentiment toward IASG. The opportunity created by the current sentiment should be used to create further value for those shareholders who believe that the company will reach and sustain substantial profitability. Once the company demonstrates a better handle on expenses as well as more consistent attrition levels, the resulting profitability will have driven the share price higher, and the opportunity for a buyback will be lost. This is the time to repurchase shares if you believe there is a viable business at IASG. As a large shareholder I believe it is important for the Board to understand the concerns and views of its shareholder base. Please feel free to call me with any questions you may have. Sincerely, P.J. Solit President of Potomac Capital Management, Inc. 13 -----END PRIVACY-ENHANCED MESSAGE-----