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, 1996
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
Number)
3040 East Commercial Boulevard
Fort Lauderdale, Florida 33308
(Address of Principal Executive Offices)
(954) 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
12, 1996, INCLUDING 150,000 SHARES HELD BY THE ISSUER IN TREASURY. 5,126,900
SHARES WERE OUTSTANDING AT NOVEMBER 12, 1996.
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - September 30, 1996 (Unaudited) and December 31,
1995 (Audited).
Consolidated Statement of Operations - Three months and Nine months ended
September 30, 1996 and 1995 (Unaudited).
Consolidated Statement of Shareholders' Equity - December 31, 1992 through
September 30, 1996.
Consolidated Statement of Cash Flows - Nine months ended September 30, 1996
and 1995 (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
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 382,136 $ 261,385
Investment in marketable
trading securities - at
market 625,366 588,830
Accounts receivable - trade - net
of allowance for uncollectable
accounts of $2,500 in 1996 and 1995 22,823 60,290
Accounts receivable - other 42,570 5,996
Note receivable 10,500 10,500
Inventory 148,158 148,196
Other 6,521 4,511
TOTAL CURRENT ASSETS 1,238,074 1,079,708
PROPERTY AND EQUIPMENT - net of
accumulated depreciation of $134,853
in 1996 and $168,181 in 1995 3,530 5,250
Other 2,283 2,278
TOTAL ASSETS $1,243,887 $1,087,236
</TABLE>
See accompanying notes to consolidated financial statements.
-4(a)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
September 30, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued
expenses - principally trade $ 55,404 $ 72,802
Deferred revenue - current 33,865 47,580
TOTAL CURRENT LIABILITIES 89,269 120,382
DEFERRED REVENUE - Non-current -- 9,851
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock $.0001 par value;
10,000,000 shares authorized;
5,276,900 shares issued in
1996 and 1995; 5,126,900 shares
outstanding in 1996 and 1995 528 528
Additional paid-in capital 2,095,391 2,095,391
Accumulated deficit ( 914,651) ( 1,112,266)
1,181,268 983,653
Less treasury stock, 150,000
shares at cost in 1996 and 1995 ( 26,650) ( 26,650)
TOTAL SHAREHOLDERS' EQUITY 1,154,618 957,003
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,243,887 $ 1,087,236
</TABLE>
See accompanying notes to consolidated financial statements.
-4(b)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30, September 30 September 30
1996 1995 * 1996 1995 *
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 50,412 $ 103,580 $ 195,312 $ 361,766
Lease income 34,133 -- 68,267 1,000
Repair and maintenance
fee income 39,990 44,959 134,930 103,330
124,535 148,539 398,509 466,096
COST AND EXPENSES:
Cost of sales (excluding
depreciation and
amortization) 47,563 47,468 154,412 152,762
Depreciation & amortization 577 1,405 2,102 3,418
Selling, general and
administrative expense 63,079 73,820 212,909 236,047
TOTAL OPERATING EXPENSES 111,219 122,693 369,423 392,227
INCOME (LOSS) FROM OPERATIONS 13,316 25,846 29,086 73,869
OTHER INCOME (EXPENSE)
Interest and
dividend income 11,069 9,193 30,394 27,656
Realized and unrealized
gain (loss) on
marketable securities (10,566) 6,495 138,060 37,435
Other 25 1,042 75 1,042
NET INCOME (LOSS) $ 13,844 $ 42,576 $ 197,615 $ 140,002
</TABLE>
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
Contd..
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
September 30, September 30, September 30, September 30
1996 1995 * 1996 1995 *
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 5,126,900 5,126,900 5,126,900 5,126,900
NET INCOME (LOSS)
PER COMMON SHARE $ -- $ .01 $ .04 $ .03
*Reclassified for comparative purposes
See accompanying notes to consolidated financial statements
-5(b)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Deficiency)
FROM DECEMBER 31, 1992 THROUGH SEPTEMBER 30, 1996
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 - 12/31/92 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 Loss for period -- -- -- (22,717) -- (22,717)
Balance - 12/31/95 5,126,900 528 2,095,391 (1,112,266) (26,650) 957,003
Net Income for period -- -- -- 197,615 -- 197,615
Balance - 09/30/96 5,126,900 $ 528 $2,095,391 $( 914,651) $ (26,650) $ 1,154,618
Shown on the accompanying Balance Sheet as follows: Issued: 5,276,900
Treasury Shares: ( 150,000)
5,126,900
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Profit $ 197,615 $ 140,002
Adjustments to reconcile net income
to net cash (used in) provided by
operating activities:
Depreciation and amortization 2,102 3,418
(Gain) Loss on sale of marketable
securities ( 140,345) 12,054
Allowance for market decline
of securities 2,285 ( 49,489)
Gain on disposition of assets - ( 925)
Purchase of marketable trading
securities ( 538,736) ( 495,111)
Proceeds from sale of marketable
trading securities 603,894 409,267
Changes in operating assets
and liabilities:
(Increase) decrease in trade
accounts receivable 37,467 ( 18,218)
(Increase) decrease in inventory 524 8,030
(Increase) decrease in accounts
receivable - Other ( 208) ( 10,348)
(Increase) decrease in other assets ( 2,015) ( 141)
Increase (decrease) in accounts
payable and accrued expenses ( 17,398) ( 16,382)
Increase (decrease) in deferred
revenue ( 23,566) 40,799
Total adjustments ( 75,996) ( 117,046)
Net cash provided by (used in)
operating activities 121,619 22,956
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances paid on notes receivable
- affiliate -- ( 50,000)
Principal collections on notes
receivable - affiliate -- 9,456
Principal collections on notes
receivable - other -- 11,500
Purchase of property and
equipment ( 868) ( 4,667)
Sale of property and
equipment -- 925
Net cash (used in) provided by
investing activities ( 868) ( 32,786)
</TABLE>
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Contd..
<TABLE>
<CAPTION>
Nine Months Ended
September 30, September 30,
1996 1995
(Unaudited) (Unaudited)
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 120,751 ( 9,830)
CASH AND CASH EQUIVALENTS -
Beginning of period 261,385 264,125
CASH AND CASH EQUIVALENTS -
End of period $ 382,136 $ 254,295
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
SEPTEMBER 30, 1996
(Unaudited)
NOTE 1 - FAIR PRESENTATION
The balance sheet as of September 30, 1996, the statement of operations for
the three months and nine months ended September 30, 1996 and 1995, the
statement of shareholders' equity as of September 30, 1996 and the statement
of cash flows for the nine months ended September 30, 1996 and 1995, 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, 1996 and for all periods presented have been made.
The condensed financial statements as of December 31, 1995, 1994 and 1993 have
been derived from audited financial statements.
The operations for the nine months ended September 30, 1996, 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, 1995, 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 nine month periods ended September 30, 1996 and 1995, per share
information was computed using the weighted average number of common shares
outstanding during the periods.
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
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
SEPTEMBER 30, 1996
(Unaudited)
marketable trading securities amounts to $625,366 at September 30, 1996, and
$588,830 at December 31, 1995. The cost of these investments is $836,890 and
$798,070 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 - INCOME TAXES
The Company does not provide for any income taxes since it has net operating
losses to offset any current provision for income taxes.
NOTE 5 - LEGAL PROCEEDINGS
The Company was named as a party defendant in an Illinois action arising from
the death of an individual at the hands of a house arrest detainee. The
lawsuit sought money damages in an unspecified amount. The complaint alleged
that the decedent's demise was a consequence of unspecified "malfunction" of
equipment previously marketed by the Company. The lawsuit sought money
damages in an unspecified amount. The complaint was twice dismissed at the
Company's motion. The dismissal was appealed by the Plaintiff and on June 25,
1996, the Second District Appellate Court of Illinois affirmed dismissal of
the lawsuit by the lower court. Following loss of the appeal the Plaintiff
petitioned the Supreme Court of Illinois for permission to appeal the Second
District Appellate Court's decision. The Illinois Supreme Court denied the
Plaintiff's petition on October 2, 1996. The case is now dismissed with
prejudice and is concluded.
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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, 1996, the Company had current
assets of $1,238,074 as compared to $1,079,708 at December 31, 1995, total
assets of $1,243,887 as compared to $1,087,236 at December 31, 1995, current
liabilities of $89,269 as compared to $120,382 at December 31, 1995 and a
current net worth of $1,154,618 as compared to $957,003 at December 31, 1995.
The change in net worth was attributable to the net profit incurred for the
nine months ended September 30, 1996.
(a)(1) Liquidity. In the nine (9) months ended September 30, 1996, the
Company had an increase in cash and cash equivalents of $120,751 due
principally to the proceeds from the sale of marketable trading securities and
net income.
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, 1996 were $398,509 as compared to $466,096 for the
nine (9) month period ended September 30, 1995. The reduction in revenues was
due to a decline in sales of new units. Revenues for the three (3) months
ended September 30, 1996 were $124,535 as compared to $148,539 for the same
period in 1995. The principal reason for the decrease was due to a decline in
sales of new units.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
Costs and expenses for the nine(9) months ended September 30, 1996,
amounted to $369,423, as compared to $392,227 for the period ended September
30, 1995. Costs and expenses decreased in comparison to the comparable nine
(9) month period in 1995, primarily due to decreased selling, general and
administrative expenses. Costs and expenses for the three (3) months ended
September 30, 1996 were $111,219 as compared to $122,693 for the same period
in 1995. The principal reason for the decrease in costs and expenses was
decreased selling, general and administrative expenses.
The Company realized a net profit of $197,615 for the nine (9) month
period ended September 30, 1996 as compared to a net profit of $140,002 for
the nine (9) month period ended September 30, 1995. The increase was
primarily due to an increase in realized and unrealized gain on marketable
trading securities. The Company realized a net profit of $13,844 for the
three (3) month period ended September 30, 1996 as compared to a net profit of
$42,576 for the three (3) month period ended September 30, 1995. The decrease
was primarily due to an decrease in sales of new units and realized and
unrealized gain on marketable trading securities.
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 13, 1996 /S/Norman H. Becker
Norman H. Becker, President
Date: November 13,1996 /S/Diane Martini
Diane Martini, Secretary/Treasurer
Date: November 13,1996 /S/Frank R. Bauer
Frank R. Bauer, Vice President
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<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statements of Cash Flows and Notes thereto
incorporated in Part I, Item 1. of this Form 10-Q and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1996
<CASH> 382,136
<SECURITIES> 625,366
<RECEIVABLES> 78,393
<ALLOWANCES> 2,500
<INVENTORY> 148,158
<CURRENT-ASSETS> 1,238,074
<PP&E> 138,383
<DEPRECIATION> 134,853
<TOTAL-ASSETS> 1,243,887
<CURRENT-LIABILITIES> 89,269
<BONDS> 0
0
0
<COMMON> 528
<OTHER-SE> 1,154,090
<TOTAL-LIABILITY-AND-EQUITY> 1,243,887
<SALES> 195,312
<TOTAL-REVENUES> 398,509
<CGS> 154,412
<TOTAL-COSTS> 369,423
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 197,615
<INCOME-TAX> 0
<INCOME-CONTINUING> 197,615
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 197,615
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
