SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended September 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
33-02035-A
(Commission File Number)
CORRECTIONS SERVICES, INC.
(Exact name of Registrant as specified in its charter)
Florida 59-2508470
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
3040 East Commercial Boulevard
Fort Lauderdale, Florida 33308
(Address of Principal Executive Offices)
(305) 772-2297
(Registrant's Telephone Number)
None
(Former Name, Former Address and former Fiscal Year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has 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
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS: Indicate by check mark whether the registrant has
filed all documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the distribution
of securities under a plan confirmed by a court.
YES NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date.
5,276,900 SHARES OF COMMON STOCK, OF $.0001 PAR VALUE, WERE ISSUED AT
NOVEMBER 6, 1995, INCLUDING 150,000 SHARES HELD BY THE ISSUER IN TREASURY.
5,126,900 SHARES WERE OUTSTANDING AT NOVEMBER 6, 1995.
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1995
(Unaudited) and December 31, 1994 (Audited).
Consolidated Statement of Operations - Three months and
nine months ended September 30, 1995 and 1994 (Unaudited).
Consolidated Statement of Shareholders' Equity - December
31, 1991 through September 30, 1995.
Consolidated Statement of Cash Flows - Nine months ended
September 30, 1995 and 1994 (Unaudited).
Notes to Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
PART II. OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED BALANCE SHEETS
ASSETS
<CAPTION>
September 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 254,295 $ 264,125
Investment in marketable
trading securities - at
market 583,678 468,229
Accounts receivable - trade - net
of allowance for uncollectable
accounts of $2,500 in 1995 and 1994 142,679 124,461
Accounts receivable - other 28,098 9,920
Note receivable - affiliate - current 24,708 --
Note receivable - other 10,500 22,000
Inventory 192,664 200,694
Other 4,894 4,148
TOTAL CURRENT ASSETS 1,241,516 1,093,577
PROPERTY AND EQUIPMENT - net of
accumulated depreciation of $166,750
in 1995 and $165,699 in 1994 6,539 5,290
NOTES RECEIVABLE - Affiliate
- non-current 15,836 --
Other 2,496 3,101
TOTAL ASSETS $1,266,387 $1,101,968
</TABLE>
[FN]
See accompanying notes to consolidated financial statements.
-4(a)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
<CAPTION>
September 30, December 31,
1995 1994
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued
expenses - principally trade $ 70,534 $ 86,916
Deferred revenue - current 62,442 11,188
TOTAL CURRENT LIABILITIES 132,976 98,104
DEFERRED REVENUE - Non-current 13,689 24,144
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock $.0001 par value;
10,000,000 shares authorized;
5,276,900 shares issued in
1995 and 1994; 5,126,900 shares
outstanding in 1995 and 1994 528 528
Additional paid-in capital 2,095,391 2,095,391
Accumulated deficit ( 949,547) ( 1,089,549)
1,146,372 1,006,370
Less treasury stock, 150,000
shares at cost ( 26,650) ( 26,650)
TOTAL SHAREHOLDERS' EQUITY 1,119,722 979,720
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,266,387 $ 1,101,968
</TABLE>
[FN]
See accompanying notes to consolidated financial statements.
-4(b)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 103,580 $ 318,787 $ 361,766 $ 591,660
Lease income -- -- 1,000 1,994
Repair and maintenance
fee income 44,959 24,044 103,330 59,774
148,539 342,831 466,096 653,428
COST AND EXPENSES:
Cost of sales (excluding
depreciation and
amortization 47,468 158,613 152,762 339,708
Depreciation and
amortization 1,405 2,475 3,418 7,424
Selling, general and
administrative expense 73,820 84,236 236,047 267,869
Interest expense -- -- -- 22
TOTAL OPERATING EXPENSES 122,693 245,324 392,227 615,023
INCOME (LOSS) FROM OPERATIONS 25,846 97,507 73,869 38,405
OTHER INCOME (EXPENSE)
Interest income 3,408 1,014 10,038 2,751
Realized and unrealized
gain (loss) on
marketable securities 6,495 144,964 37,435 27,179
Other 6,827 5,182 18,660 18,145
</TABLE>
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
(Continued)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30, September 30,
1995 1994 1995 1994
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
INCOME (LOSS) BEFORE INCOME
TAXES AND EXTRAORDINARY
ITEM 42,576 248,667 140,002 86,480
PROVISION FOR INCOME TAXES 14,000 27,000 32,000 12,500
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 28,576 221,667 108,002 73,980
EXTRAORDINARY ITEM -
TAX BENEFIT OF NET
OPERATING LOSS
CARRYFORWARD 14,000 27,000 32,000 12,500
NET INCOME (LOSS) $ 42,576 $ 248,667 $ 140,002 $ 86,480
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 5,126,900 5,188,857 5,126,900 5,197,505
NET INCOME (LOSS)
PER COMMON SHARE $ .01 $ .05 $ .03 $ .01
</TABLE>
[FN]
See accompanying notes to consolidated financial statements
-5(b)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Deficiency)
FROM DECEMBER 31, 1991 THROUGH SEPTEMBER 30, 1995
<CAPTION>
Common Stock
$.0001 Par Value
Authorized Addt'l Retained
10,000,000 Shares Paid-In Earnings Treasury
Shares Amount Capital (Deficit) Stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance - 12/31/91 5,176,900 $ 518 $2,087,068 $(1,205,617) $ $ 881,969
Issuance of common
stock for services 100,000 10 8,323 -- -- 8,333
Net loss for period -- -- -- (1,145,708) -- (1,145,708)
Balance - 12/31/92 5,276,900 528 2,095,391 (2,351,325) -- ( 255,406)
Receipt of Common
Stock in settlement
of Note Receivable
(75,000 Shares) ( 75,000) -- -- -- ( 7,900) ( 7,900)
Net Income for period -- -- -- 1,200,364 -- 1,200,364
Balance - 12/31/93 5,201,900 528 2,095,391 (1,150,961) ( 7,900) 937,058
Net Income for period -- -- -- 61,412 -- 61,412
Purchase of Treasury
Shares ( 75,000) -- -- -- (18,750) ( 18,750)
Balance - 12/31/94 5,126,900 528 2,095,391 (1,089,549) (26,650) 979,720
Net Income for period -- -- -- 140,002 -- 140,002
Balance - 09/30/95 5,126,900 $ 528 $2,095,391 $( 949,547) $(26,650) $ 1,119,722
Shown on the accompanying Balance Sheet as follows: Issued: 5,276,900
Treasury Shares: ( 150,000)
5,126,900
</TABLE>
[FN]
See accompanying notes to consolidated financial statements.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<CAPTION>
Nine Months Ended
September 30, September 30,
1995 1994*
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Profit $ 140,002 $ 86,480
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 3,418 7,424
(Gain) Loss on sale of marketable
securities 12,054 11,072
Allowance for market decline
of securities ( 49,489) ( 38,251)
Gain on disposition of assets ( 925) --
Purchase of marketable trading
securities ( 495,111) ( 150,855)
Proceeds from sale of marketable
trading securities 409,267 214,378
Changes in operating assets
and liabilities:
(Increase) decrease in trade
accounts receivable ( 18,218) ( 34,331)
Decrease in inventory 8,030 40,625
Increase (decrease) in accounts
receivable - Other ( 10,348) 1,952
(Increase) decrease in other assets ( 141) ( 3,760)
Increase (decrease) in accounts
payable and accrued expenses ( 16,382) ( 5,362)
Increase in deferred revenue 40,799 10,871
Total adjustments ( 117,046) 53,763
Net cash provided by (used in)
operating activities 22,956 140,243
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances paid on notes receivable
- affiliate ( 50,000) --
Principal collections on notes
receivable - affiliate 9,456 --
Principal collection on
note receivable - Other 11,500 3,000
Purchase of property and
equipment ( 4,667) --
Sale of property & equipment 925 --
Net cash (used in) provided by
investing activities ( 32,786) 3,000
</TABLE>
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Continued)
<CAPTION>
Nine Months Ended
September 30, September 30,
1995 1994*
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of Treasury Stock $ -- $( 18,750)
Net cash provided by (used in)
financing activities -- ( 18,750)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS ( 9,830) 124,493
CASH AND CASH EQUIVALENTS -
Beginning of period 264,125 173,996
CASH AND CASH EQUIVALENTS -
End of period $ 254,295 $ 298,489
</TABLE>
[FN]
* Reclassified for comparative purposes.
[FN]
See Accompanying Notes to Consolidated Financial Statements.
-7(b)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
SEPTEMBER 30, 1995
(Unaudited)
NOTE 1 - FAIR PRESENTATION
The balance sheet as of September 30, 1995, the statement of
operations for the three months and nine months ended
September 30, 1995 and 1994, the statement of shareholders'
equity as of September 30, 1995 and the statement of cash
flows for the nine months ended September 30, 1995 and 1994,
have been prepared by the Company without audit. In the
opinion of management, all adjustments (which include only
normal recurring accruals) necessary to present fairly the
financial position and results of operations at September 30,
1995 and for all periods presented have been made.
The condensed financial statements as of December 31, 1994,
1993 and 1992 have been derived from audited financial
statements.
The operations for the nine months ended September 30, 1995,
are not necessarily indicative of the results of operations
to be expected for the Company's fiscal year.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed
or omitted. It is suggested that these condensed financial
statements be read in conjunction with the consolidated
financial statements and notes thereto as of December 31,
1994, and for the year then ended.
NOTE 2 - BASIS OF PRESENTATION
The accompanying financial statements include accounts of
the Company and its wholly-owned subsidiary, Corrections
Systems International, Inc. All significant intercompany
accounts and transactions have been eliminated in
consolidation.
NOTE 3 - EARNINGS (LOSS) PER SHARE
For the three month and nine months periods ended September
30, 1995 and 1994, per share information was computed using
the weighted average number of common shares outstanding
during the periods.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
SEPTEMBER 30, 1995
(Unaudited)
NOTE 4 - INVESTMENT IN MARKETABLE EQUITY SECURITIES
Marketable trading securities are stated at market value at
the balance sheet date. Market values of investments in
marketable trading securities amounts to $583,678 at
September 30, 1995, and $468,229 at December 31, 1994. The
cost of these investments is $712,627 and $646,667
respectively. Unrealized gains and losses resulting from
fluctuations in the market price of the related trading
securities are currently reflected in the statement of
operations under the caption "Realized (unrealized) gain
(loss) on marketable trading securities".
NOTE 5 - LEGAL PROCEEDINGS
The Company was named as a party defendant in an Illinois
wrongful death action. The complaint alleged that the
decedent's demise was attributable to "In-House Arrest"
equipment previously marketed by the Company and sold to the
Lake County, Illinois Corrections Department. The Company
filed motions to dismiss the complaint for failing to state
a factual or legal basis for liability against the Company.
On July 14, 1995, the court entered an order granting the
Company's motion and dismissing the entire suit with
prejudice. The Plaintiff has appealed the trial court's
rejection of the lawsuit in its entirety. Management
intends to continue to contest the appeal vigorously as
without merit.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The analysis of the Company's financial condition, liquidity,
capital resources and results of operations should be viewed in
conjunction with the accompanying financial statements, including
the notes thereto.
(a) Financial Condition. At September 30, 1995, the Company
had current assets of $1,241,516 as compared to $1,093,577 at
December 31, 1994, total assets of $1,266,387 as compared to
$1,101,968 at December 31, 1994, current liabilities of $132,976 as
compared to $98,104 at December 31, 1994 and a current net worth of
$1,119,722 as compared to $979,720 at December 31, 1994. The
change in net worth was attributable to the net profit incurred for
the period ended September 30, 1995.
(a)(1) Liquidity. In the nine (9) months ended September 30,
1995, the Company had a nominal decrease in cash and cash
equivalents of $9,830.
The Company's operating expenses have continued in this
reporting period, at what the Company believes to be a minimal
level. The Company has no present commitments that are reasonably
likely to result in its liquidity increasing or decreasing in any
material way. In addition, the Registrant knows of no trend,
additional demand, event or uncertainties that will result in, or
that are reasonably likely to result in, its liquidity increasing
or decreasing in any material way.
(a)(2) Capital Resources. The Company has no present
material commitments for additional capital expenditures. The
Company has no outstanding credit lines or loan commitments in
place and has no immediate need for additional financial credit.
In the event of future need, the Company believes that it will be
able to borrow from its affiliate, Vanderbilt Square Corp., or
borrow commercially at prevailing terms through loans
collateralized, if necessary, by its assets. There can be no
assurance however, that it will be able to secure additional
financing, if needed, or that if available, on terms acceptable to
the Company.
(a)(3) Results of Operations. The Company's revenues for the
nine (9) months ending September 30, 1995 were $466,096 as compared
to $653,428 for the nine (9) month period ended September 30, 1994
due primarily to reduced sales. Revenues for the three (3) months
ended September 30, 1995 were $148,539 as compared to $342,831 as
a result of reduction in the sale of new units.
Costs and expenses for the nine (9) months ended September 30,
1995, amounted to $392,227, as compared to $615,023 for the period
-10-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
ended September 30, 1994. Costs and expenses decreased in
comparison to the comparable nine (9) month period in 1994,
primarily due to decreased cost of sales. Costs and expenses for
the three (3) months ended September 30, 1995 were $122,693 as
compared to $245,324 for the same period in 1994. The principal
reason for the reduction in costs and expenses in this reporting
period was also reduction in cost of sales.
The Company realized net profits of $140,002 for the nine (9)
month period ended September 30, 1995 as compared to net profits of
$86,480 for the nine (9) month period ended September 30, 1994.
The increase was primarily due to increased repair and maintenance
fee income and a decrease in cost and expenses. In addition, the
Company realized a net profit for the three (3) months ended
September 30, 1995 of $42,576 as compared to a net profit of
$248,667 for the comparable period last year. The reduction in net
profit was principally attributable to the reduced sale of units.
The Registrant knows of no trends or uncertainties, or other
items, that had, or that the Company reasonably expects will have,
a materially favorable or unfavorable impact on revenues or income
from future operations, if any. Moreover, Registrant knows of no
events that will cause a material change in the relationship
between its costs and revenues.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(b) The Registrant filed no Current Reports on Form 8-K
during this reporting period.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CORRECTIONS SERVICES, INC.
Date: November 10, 1995 /s/ Norman H. Becker
Norman H. Becker, President
Date: November 10, 1995 /s/ Diane Martini
Diane Martini, Secretary/Treasurer
Date: November , 1995 /s/ Frank R. Bauer
Frank R. Bauer, Vice President
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Balance Sheets, Consolidated Statement of Operations, Consolidated Statement of
Shareholders' Equity, Consolidated Statement of Cash Flows and Notes thereto
incorporated in Part I, Item 1., Financial Statements of this Form 10-Q and is
qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000785562
<NAME> CORRECTIONS SERVICES, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1995
<CASH> 254295
<SECURITIES> 583678
<RECEIVABLES> 208485
<ALLOWANCES> (2500)
<INVENTORY> 192664
<CURRENT-ASSETS> 1241516
<PP&E> 173289
<DEPRECIATION> 166750
<TOTAL-ASSETS> 1266387
<CURRENT-LIABILITIES> 132976
<BONDS> 0
<COMMON> 528
0
0
<OTHER-SE> 1145844
<TOTAL-LIABILITY-AND-EQUITY> 1266387
<SALES> 361766
<TOTAL-REVENUES> 466096
<CGS> 152762
<TOTAL-COSTS> 392227
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 140002
<INCOME-TAX> 32000
<INCOME-CONTINUING> 108002
<DISCONTINUED> 0
<EXTRAORDINARY> 32000
<CHANGES> 0
<NET-INCOME> 140002
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
