UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended: December 31, 2002
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[ ] 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 0-10093
Intercom Systems, Inc.
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(Exact name of small business issuer as specified in its charter)
Delaware 11-2599441
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
111 Village Parkway, Building 2, Marietta, Georgia 30067
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(Address of principal executive offices) (Zip Code)
770-951-0984
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(Issuer's telephone number)
N/A
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(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 Securities Exchange Act of 1934 during the preceding
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
----- ------
State the number of shares outstanding of each of the issuer's classes of
common equity as of the latest practicable date: As of February 14, 2003, the
issuer had 8,008,229 shares of common stock, par value $.01 per share,
outstanding.
Transitional Small Business Disclosure Format (check one):
Yes No X
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INTERCOM SYSTEMS, INC.
Form 10 - QSB
For the Quarterly Period Ended December 31, 2002
TABLE OF CONTENTS
Page No.
Part I -Financial Information --------
Item 1. Financial Statements
Condensed Balance Sheet as of December 31, 2002..................1
Condensed Statements of Operations for the three and
six month periods ended December 31, 2002 and 2001...............2
Condensed Statements of Cash Flows for the six
month periods ended December 31, 2002 and 2001...................3
Notes to Condensed Financial Statements ......................4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations..................5 - 6
Item 3. Controls and Procedures..........................................7
Part II -Other Information
Item 5. Other Information................................................7
Item 6. Exhibits and Reports on Form 8 - K...............................7
Signatures and Certifications.................................8 - 10
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INTERCOM SYSTEMS, INC.
CONDENSED BALANCE SHEET
DECEMBER 31, 2002
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,830
============
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 18,397
Due to affiliated company 4,500
------------
TOTAL LIABILITIES 22,897
------------
STOCKHOLDERS' DEFICIT:
Preferred stock - $100 par value per share,
100,000 shares authorized, none outstanding -
Common stock - $.0005 par value per share,
200,000,000 shares authorized,
8,008,229 shares issued and outstanding 4,000
Additional capital in excess of par value 5,200,000
Accumulated deficit (5,224,067)
-----------
TOTAL STOCKHOLDERS' DEFICIT (20,067)
-----------
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT $ 2,830
===========
The accompanying notes are an integral
part of these condensed financial statements.
(1)
INTERCOM SYSTEMS, INC.
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
Six Months Ended Three Months Ended
-------------------------------- ------------------------------
December 31, December 31,
-------------------------------- ------------------------------
2002 2001 2002 2001
-------------- -------------- -------------- ------------
REVENUES:
Interest $ 22 $ 733 $ 2 $ 229
-------------- -------------- -------------- ------------
EXPENSES:
Professional fees 19,322 25,954 11,871 14,984
Management and administration fees 3,564 4,495 1,939 2,725
Stockholder relations 2,540 2,415 1,340 1,215
Franchise taxes 1,290 1,500 690 750
-------------- ------------- -------------- ------------
TOTAL EXPENSES 26,716 34,364 15,840 19,674
-------------- ------------- -------------- ------------
NET LOSS $ (26,694) $ (33,631) $ (15,838) $ (19,445)
============== ============= ============== ============
BASIC AND DILUTED NET LOSS PER SHARE $ - $ - $ - $ -
============== ============= ============== ============
WEIGHTED AVERAGE NUMBER OF
SHARES OUTSTANDING 8,008,229 8,008,229 8,008,229 8,008,229
============== ============= ============== ============
The accompanying notes are an integral
part of these condensed financial statements.
(2)
INTERCOM SYSTEMS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
December 31,
----------------------------
2002 2001
----------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (26,694) $ (33,631)
Adjustments to reconcile net loss to
net cash from operating activities:
Increase (decrease) in;
Accounts payable and accrued expenses (10,717) 8,961
----------- ----------
NET CASH USED BY OPERATING ACTIVITIES (37,411) (24,670)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Advance received from affiliated company 4,500 -
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NET DECREASE IN CASH AND CASH EQUIVALENTS (32,911) (24,670)
CASH AND CASH EQUIVALENTS - beginning 35,741 86,513
---------- ----------
CASH AND CASH EQUIVALENTS - ending $ 2,830 $ 61,843
========== ==========
The accompanying notes are an integral
part of these condensed financial statements.
(3)
INTERCOM SYSTEMS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed balance sheet of Intercom
Systems, Inc. (the "Company") as of December 31, 2002 and the
unaudited condensed statements of operations for the three-month and
six-month periods ended December 31, 2002 and 2001 and the unaudited
condensed statements of cash flows for the six-month periods ended
December 31, 2002 and 2001 reflect all material adjustments which, in
the opinion of management, are necessary for a fair presentation of
results for the interim periods. Certain information and footnote
disclosures required under generally accepted accounting principles
have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission, although the Company
believes that the disclosures are adequate to make the information
presented not misleading. These financial statements should be read
in conjunction with the year-end financial statements and notes
thereto included in the Company's Annual Report on Form 10-KSB for
the year ended June 30, 2002, as filed with the Securities and
Exchange Commission on October 14, 2002.
The results of operations for the three-month and six-month periods
ended December 31, 2002 and 2001 are not necessarily indicative of
the results to be expected for the entire fiscal year or for any
other period.
NOTE 2 - LOSS PER SHARE
Net loss per common share for each period is computed by dividing the
net loss by the weighted average number of shares outstanding during
the period. Excluded from the net loss per share calculations for the
three-month and six-month periods ended December 31, 2002 and 2001
are contingently issuable shares that, if included, would have an
antidilutive effect.
NOTE 3 - RELATED PARTY TRANSACTIONS
Effective July 1, 2000, the Company has incurred management and
administrative fees in the amount of $500 per month under an
office-sharing agreement that provides administrative and
bookkeeping assistance, and for the use of offices, fixtures,
furniture and equipment. These fees are paid to a corporation whose
chief financial officer is a director, acting chairman of the board,
acting president, vice president and treasurer of the Company.
In December 2002, the Company received an advance of $4,500 from an
affiliate of several stockholders. The advance is not supported by a
promissory note, does not bear interest, and is due to be repaid as
soon as funds are available to the Company.
NOTE 4 - FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION
In January 1991, the Company filed a Form 15 with the Securities and
Exchange Commission to deregister the Company's common stock under
the Securities Exchange Act of 1934, as amended. From January 1991
until March 2001, the Company did not file any further reports under
the Securities Exchange Act of 1934. On March 1, 2001, the Company
filed its Annual Report on Form 10-KSB that included the Company's
balance sheet as of June 30, 2000 and the related statements of
operations, stockholders' equity and cash flows for the fiscal years
ended June 30, 2000, June 25, 1999 and June 26, 1998. The Company
filed Quarterly Reports on Forms 10-QSB for each quarter during
fiscal 2003, 2002 and 2001 and Annual Reports on Form 10-KSB for the
years ended June 30, 2002 and June 29, 2001. The Company is current
with its reporting obligations under the Securities Exchange Act of
1934. In November 2002, the NASD has approved trading of the
Company's common stock on the OTC Bulletin Board. Management expects
trading to begin in the near future.
(4)
Item 2. - Management's Discussion and Analysis of Financial Condition and
Results of Operations
This Form 10-QSB contains forward-looking statements that may involve known
and unknown risks, uncertainties and other factors that may cause the Company's
actual results and performance in future periods to be materially different from
any future periods or performance suggested by these statements.
Overview
Intercom Systems, Inc. was incorporated in Delaware in 1982. Until October
1989, we were engaged in the design, manufacture, marketing and sale of
microprocessor-based systems designed to access and test telecommunications
lines. To a lesser extent, we were also engaged in the sale of engineering
services to an affiliated company, TII Industries, Inc.
In October 1989, we sold all of the assets relating to its business
operations to a third party. We have had no active business operations since the
date of that sale.
On June 27, 2000, new investors, including our current management,
purchased an aggregate of 5,484,999 shares from TII Industries, Inc. and TII
International, Inc., who were our two largest stockholders. The shares purchased
by the new investors represented approximately 69 percent of the then issued and
outstanding common stock. The sale of these shares resulted in a change in
control and our management.
Current Business Plan
Our current business plan is primarily to serve as a vehicle for the
acquisition of a target business that we believe will have significant growth
potential. We intend to use our available cash, capital stock, debt or a
combination of these to effect a business combination. A business combination
may involve the acquisition of, or merger with, a financially stable, mature
company that desires to establish a public trading market for its securities
while avoiding what it may deem to be adverse consequences of undertaking a
public offering itself, such as time delays, significant expense, loss of voting
control and other burdens (including significant professional fees) related to
compliance with various federal and state securities laws. In the alternative, a
business combination may involve a company that may be financially unstable or
in its early stages of development or growth.
Management believes that we will be more attractive to a prospective
business partner if our common stock is quoted on the OTC Bulletin Board.
Therefore, we took steps to become current with our reporting obligations under
the Securities Exchange Act of 1934, and Intercom is now current with such
obligations. In November 2002, the NASD has approved trading of our common stock
on the OTC Bulletin Board. We expect trading to begin in the near future.
Financial Condition
At December 31, 2002, we had total current assets of $2,830 compared to
total current assets of $35,741 at June 30, 2002. We had total current
liabilities of $22,897 at December 31, 2002, as compared to total current
liabilities of $29,114 at June 30, 2002. At December 31, 2002, our stockholders'
deficit was $(20,067), as compared to stockholders' equity of $6,627 at June 30,
2002. The decrease in net worth was the result of the net loss of $26,694 for
the six months ended December 31, 2002.
Liquidity and Capital Resources
The only asset we possess is cash in the amount of $2,830 at December 31,
2002.
In December 2002, we received an advance of $4,500 from an affiliate of
several stockholders. The advance is not supported by a promissory note, does
not bear interest, and is due to be repaid as soon as we have available funds.
(5)
As shown in the accompanying financial statements, we incurred a net loss
of $26,694 during the six months ended December 31, 2002, and as of that date,
our cash was insufficient to satisfy our liabilities and projected expenses for
the next fiscal year. Those factors, as well as our lack of operating revenue,
create an uncertainty about our ability to continue as a going concern. We are
developing a plan to reduce the Company's liabilities and increase its working
capital by issuing additional stock and / or obtaining debt financing. The
ability of the Company to continue as a going concern is dependent on the plan's
success.
We have no current material commitments for capital expenditures.
Results of Operations
Three months ended December 31, 2002 as compared to the three months ended
- --------------------------------------------------------------------------
December 31, 2001:
- -----------------
We have had no significant revenues since 1989 and will not achieve any
significant revenues until, at the earliest, the completion of a business
combination. For the three months ended December 31, 2002 interest income was $2
compared to $229 for the comparable period of the prior fiscal year. Interest
income declined because the Company had less money invested in money market
funds during the three months ended December 31, 2002 as compared to the three
months ended December 31, 2001.
General, administrative and other expenses were $15,840 for the three
months ended December 31, 2002 compared to $19,674 for the three months ended
December 31, 2001. The decrease in general, administrative and other expenses
was due primarily to approximate decreases in legal fees of $1,700 accounting
fees of $1,400 and contract labor of $1,100 for the three months ended December
31, 2002 as compared to the three months ended December 31, 2001.
Six months ended December 31, 2002 as compared to the six months ended December
- -------------------------------------------------------------------------------
31, 2001:
- --------
For the six months ended December 31, 2002 interest income was $22 compared
to $733 for the comparable period of the prior fiscal year. Interest income
declined because the Company had less money invested in money market funds
during the six months ended December 31, 2002 as compared to the six months
ended December 31, 2001.
General, administrative and other expenses were $26,716 for the six months
ended December 31, 2002 compared to $34,364 for the six months ended December
31, 2001. The decrease in general, administrative and other expenses was due
primarily to a decrease in legal fees of approximately $4,400, accounting fees
of $2,200 and contract labor of $1,100 for the six months ended December 31,
2002 as compared to the six months ended December 31, 2001.
(6)
Item 3. - Controls and Procedures
Within the 90-day period prior to the filing of this report, an evaluation of
the effectiveness of our disclosure controls and procedures was made under the
supervision and with the participation of our former chairman of the board and
president (our former principal executive officer) and our vice president and
treasurer (our principal financial officer). Based on that evaluation, they
concluded that our disclosure controls and procedures are effective to ensure
that information required to be disclosed by us in reports that we file or
submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. Subsequent to the date of their evaluation,
our chairman of the board and president resigned and our vice president and
treasurer assumed his positions in an acting capacity. There were no other
significant changes in our internal controls or in other factors that could
significantly affect our controls, including any corrective actions with regard
to significant deficiencies and material weaknesses.
Part II Other Information
Item 5. Other Information
In December 2002, Frederick Huttner, our chairman of the board and president
resigned. Robert H. Donehew, our president and treasurer assumed the position of
acting chairman of the board and president upon his resignation, in addition to
his titles of vice president and treasurer.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
None.
(b) Reports on Form 8-K
None.
(7)
SIGNATURE
In accordance with the requirements of the Exchange Act, the registrant
caused this Form 10-QSB to be signed on its behalf by the undersigned, thereunto
duly authorized.
INTERCOM SYSTEMS, INC.
(Registrant)
Dated: February 14, 2003
By: /s/ Robert H. Donehew
-------------------------------------
Robert H. Donehew
Acting Chairman of the Board, Acting President,
Vice President and Treasurer (Principal
Financial and Accounting Officer)
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 Intercom Systems, Inc.. (the
"Company") on Form 10-QSB for the period ended December 31, 2002 as filed with
the Securities and Exchange Commission (the "Report"), each of the undersigned,
in the capacities and on the dates indicated below, hereby certifies pursuant to
18 U.S.C. Section 1350, as adopted pursuant to Section 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 results of operation of the Company.
Dated: February 14, 2003 /s/ Robert H. Donehew
-----------------------------
Robert H. Donehew
Acting Chairman of the Board, Acting President,
Vice President and Treasurer Vice President,
Treasurer and Director (Principal Executive and
Financial Officer)
(8)
CERTIFICATION
PURSUANT TO RULE 13a-14 AND 15d-14 UNDER
THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
I, Robert H. Donehew, certify that:
I have reviewed this quarterly report on Form 10-QSB of Intercom Systems, Inc.;
1. 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 quarterly report;
2. 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;
3. the registrant's other certifying officers 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 of 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;
4. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and to the audit
committee of the 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
5. 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.
Dated: February 14, 2003 /s/ Robert H. Donehew
-----------------------------
Robert H. Donehew
Acting Chairman of the Board, Acting President,
Vice President, Treasurer and Director
(Principal Executive and Financial Officer)
(9)