SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1995
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)
Securities registered pursuant to Section 12(b) of the Act
None None
(Title of Each Class) (Name of Each Exchange
on which Registered)
Securities registered pursuant to Section 12(g) of the Act
None None
(Title of Each Class) (Name of Each Exchange
on which Registered)
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
The aggregate market value of the voting stock held by non-affiliates of the
Registrant as of March 10, 1996, was approximately $475,000.
The number of shares of Common Stock, $.0001 par value, of the Registrant
issued as of March 10, 1996, was 5,276,900 shares. The Company has 150,000
shares in treasury.
<PAGE>
PART I
ITEM 1. BUSINESS
Introduction
Corrections Services, Inc. (the "Company") was incorporated in
the State of Florida in 1984. The Company was organized for the
purpose of developing and marketing a house arrest program
("Program") to relieve the need for incarceration in a jail or
similar facility. The Program consists of computer-controlled,
electronic signaling systems which permit continuous around the
clock monitoring of a client/inmate's presence or absence from his
or her residence.
Background
The Company undertook to secure equipment which would be
responsive to the needs of corrections authorities and began to
market its Program with a new hardware system supplied by an
independent manufacturer. During 1986, the Company secured
registration of its trademark "In-House-Arrest" from the United
States Patent and Trademark office (Registration No. 1,394,745).
Beginning in 1988 the Company's system was manufactured by
Marconi Electronic Devices, Ltd. ("Marconi") in the United Kingdom.
Following a long period of difficulties and shortfall, the Company
filed a federal lawsuit against Marconi for breach of contract and
breach of warranty, seeking damages and ending its turbulent
manufacturing and supply arrangement with Marconi. On July 28,
1993 a settlement agreement was entered into fully and finally
terminating the litigation.
Pursuant to the settlement agreement, the Company transferred
certain product equipment, intellectual property rights in the
systems' equipment design and software and a three year covenant
not to compete to Marconi. In exchange, the Company received
extinguishment of its approximately $2.1 Million payable to Marconi
and the sum of $250,000 in cash. Following closing of the
settlement agreement the Company, within the bounds of its non-
compete agreement, continued to service its existing customer base.
Subsequent Developments
Subsequent to the litigation settlement, Marconi sold all of
its tangible and intangible assets related to the system's
equipment production, sales and service to Aeroflex Laboratories,
Inc. of Plainview, New York. After settlement of the litigation in
mid-1993, neither Marconi nor Aeroflex had engaged in any
operations in the monitoring systems marketplace. In late May
1994, the Company approached Aeroflex with a view toward purchase
of all of the system assets and release from its non-compete
<PAGE>
agreement with Marconi.
On July 1, 1994, the Company both re-acquired from Aeroflex
all of the system equipment it had relinquished in the litigation
settlement agreement, and acquired all of the other tangible and
intangible assets related to production, sales and service of the
product line previously acquired by Aeroflex from Marconi,
including completed parts and parts for construction of additional
units, all of the related software, firmware, tooling, tools and
test equipment and all intellectual property including patents and
design and manufacturing drawings, schematics, information and
records. The Company was also able to secure unconditional release
from the non-compete agreement with Marconi.
In exchange, the Company paid Aeroflex Laboratories, Inc. the
sum of $100,000 in cash and released Aeroflex Laboratories, Inc.
and Marconi from liability for equipment field service obligations,
including outstanding, unexpired manufacturer's equipment
warranties, which obligations were assumed by the Company.
With completion of the Aeroflex transaction in mid-1994 the
Company in effect, negated all of the limiting factors imposed
encountered by settlement of the litigation against Marconi in mid-
1993. The Company re-entered the marketplace depending upon its
newly acquired, finished equipment inventory, and continues on-
going evaluation of manufacturing options for possible future
implementation prior to potential exhaustion, if any, of its
finished equipment inventory.
Employees
In addition to its officers, Mr. Norman H. Becker and Mr.
Frank R. Bauer, who each currently devote approximately ten (10%)
percent of their time to its activities, and Ms. Diane Martini, who
currently devotes approximately eighty (80%) percent of her time to
its activities, the Company currently has five (5) other full-time
employees See Part III., Item 10, Directors and Executive Officers
of the Registrant.
ITEM 2. PROPERTIES
The Company occupies its principal offices and shop facilities
space on a month-to-month basis at a combined rental and
administrative charge of $2,600 per month ($31,200 per annum).
The Company also occupies warehouse space in the City of
Pompano Beach, Florida on an annual lease basis at a rental of $791
per month ($9492 per annum).
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is not now a party to any litigation or, to its
knowledge, threatened litigation, at March 11, 1996 other than the
following:
Estate of Holly Staker, et al vs. Correction Services, Inc., Lake
County and Electronic Supervision Services Corp., Case No. 94-L-
141, Circuit Court of the Nineteenth Judicial Circuit In And For
Lake County, Illinois.
On February 28, 1994, the Company was served with a wrongful
death complaint arising from the violent death of Ms. Holly Staker
on or about August 17, 1992 at the hands of an individual who was
at the time assigned to the In-House Arrest system owned and
operated, on the Company's information and belief, by the Lake
County Sheriff's or Corrections Department.
The Complaint seeks money damages for Ms. Staker's wrongful
death in an unspecified amount and is brought by the Decedent's
estate and various individuals under Illinois wrongful death
statutes. The Complaint was twice dismissed at the Company's
instance. The Plaintiff has appealed the Court's dismissal of the
suit. The appeal is currently in the pleading (brief) stage and no
decision has been reached. The amended complaint alleged
unspecified "malfunction" and sought to impose strict liability to
the seller for consequences of the prisoner's subsequent illegal
acts.
The Company's appellate counsel is unable to estimate the
likely outcome of the appeal.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's security
holders during the fourth quarter of fiscal 1995, through
solicitation of proxies or otherwise.
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The following table sets forth the range of bid and asked
prices for the Company's Common Stock on the Over-The-Counter
Market for the period indicated, as reported by the National
Quotation Bureau, Inc. The Common Stock is traded on the
electronic bulletin board under the symbol CRSI. The figures shown
represent inter-dealer quotations without retail mark-up, mark-down
or commission and may not necessarily represent actual
transactions.
<TABLE>
<CAPTION>
COMMON STOCK
Period Bid Price Asked Price
High Low High Low
<S> <C> <C> <C> <C>
First Quarter, 1994 $0.188 $0.125 $0.375 $0.25
Second Quarter, 1994 $0.188 $0.125 $0.375 $0.188
Third Quarter, 1994 $0.25 $0.125 $0.30 $0.20
Fourth Quarter, 1994 $0.25 $0.06 $0.30 $0.20
First Quarter, 1995 $0.125 $0.06 $0.15 $0.06
Second Quarter, 1995 $0.125 $0.10 $0.30 $0.025
Third Quarter, 1995 $0.125 $0.10 $0.025 $0.20
Fourth Quarter, 1995 $0.125 $0.10 $0.025 $0.20
First Quarter, 1996 $0.125 $0.10 $0.025 $0.20
</TABLE>
(b) Holders. As of March 11, 1996, the approximate number of
recordholders of Common Stock of the Registrant was 575.
The Company is unable to determine the actual number of
beneficial holders of its Common Stock at March 11, 1996 due to
Common Stock held for stockholders "in street name" but estimates
the current total to be approximately 1,050.
(c) Dividends. Registrant has paid no dividends since inception
and does not now anticipate paying cash dividends in the
foreseeable future. See Item 7.(a) Financial Condition.
<PAGE>
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Summary of Statement of Operations:
As of As of As of As of As of
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
<S> <C> <C> <C> <C> <C>
Revenue $ 533,269 $ 890,094 $ 612,178 $ 655,309 $2,275,216
Oper. Exp. $ 542,884 $ 708,578 $1,058,497 $1,831,620 $2,242,355
Net Income (Loss) ($ 22,717) $ 61,412 $1,200,364 ($1,145,708) $ 73,489
Weighted No. of
shs. outstanding 5,126,900 5,179,709 5,181,545 5,181,545 5,176,900
Net Income (Loss)
per sh. Common
Stk. outstanding ($ .004 ) $ .01 $ .23 ($ .22 ) $.01
(See Note A-Notes
to Fin. Stmts.)
</TABLE>
<TABLE>
<CAPTION>
Summary Balance Sheet Information
As of As of As of As of As of
12/31/95 12/31/94 12/31/93 12/31/92 12/31/91
<S> <C> <C> <C> <C> <C>
Total Assets $1,087,236 $1,101,968 $1,032,050 $2,043,688 $3,125,859
Total Current $ 120,382 $ 98,104 $ 85,314 $2,282,599 $2,243,890
Liabilities
Tot. Current Assets $1,079,708 $1,093,577 $1,015,736 $1,945,207 $2,920,939
Stkholders' Equity $ 957,003 $ 979,720 $ 937,058 ($ 255,406) $ 881,969
Cash Dividends $ -0- $ -0- $ -0- $ -0- $ -0-
</TABLE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
(a) Financial Condition. As of December 31, 1995 the Company
had current assets of $1,079,708 compared to $1,093,577 at December
31, 1994, total assets of $1,087,236 compared to $1,101,968 at
December 31, 1994 and shareholders equity of $957,003 as compared
to $979,720 as of December 31, 1994. The decrease of its current
assets and total assets were primarily the result of the Company's
decrease in accounts receivable and merchandise inventory. See
Part I, Item 1., Business, Recent Developments. The decrease in
shareholders equity at December 31, 1995 to $957,003, from $979,720
at December 31, 1994, was primarily the result of earnings of a net
loss of $22,717 for the year ended December 31, 1995.
At December 31, 1995, the Company realized a net loss for the
year then ended which decreased shareholders equity from $979,720
at year end 1994, to $957,003 at year end 1995.
<PAGE>
Liquidity. The Company had a net decrease in cash and cash
equivalents for the year ended December 31, 1995 of $2,740, and
cash and cash equivalents at the end of the year of $261,385 as
compared to an increase in cash and cash equivalents of $90,129,
and cash and cash equivalents of $264,125 for the year ended
December 31, 1994. See Part II, Item 8., Financial Statements and
Supplementary Data.
The Company continues to have no fixed executory obligations.
Capital Resources. The Company has no present material
commitments for additional capital expenditures. The Company has
no outstanding credit lines or commitments in place and no
immediate need for additional financial credit. There can be no
assurance that it will be able to secure additional credit
borrowing, if needed.
Results of Operations. The Company's revenues for the fiscal
period ended December 31, 1995, were derived from sales, lease
income and repairs and maintenance income. The Company's prior
warranty income has dwindled to nothing in keeping with its
assumption of existing supplier's warranty obligations in the
Aeroflex transaction. See Part I, Item 1., Business, Subsequent
Developments.
The Company's revenues decreased to $533,269 for the fiscal
year ended December 31, 1995, as compared to $890,094 for the same
period of 1994. The principal reason for the decrease was
decreased revenue from its net sales.
Operating expenses decreased to $542,884 as compared to
$708,578 for the same period last year due to decreases in cost of
sales and selling, general and administrative expenses. The
Company realized a net loss of $22,717 for the fiscal year ended
December 31, 1995, as compared to a net income of $61,412 for the
same period last year. The decrease in net income was primarily
due to decreased net sales.
Operating expense decreases in the period ended December 31,
1995 of $165,694 in comparison to 1994 were primarily attributable
to decreases in both cost of sales and in selling, general and
administrative expenses. Selling, general and administrative
expenses were also reduced from 1994 primarily due to decreased
consulting and legal fees.
The Company knows of no unusual or infrequent events or
transactions, nor significant economic changes that have materially
affected the amount of its reported income from continuing
operations for the year ended December 31, 1995.
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See attached financial statements and supplementary data.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a)(b) Identification of Directors and Executive Officers
Name Age Offices Held
Norman H. Becker 58 President/Director
Frank Bauer 51 Vice President/
Director
Diane Martini 48 Secretary/Treasurer/
Director
Eugene M. Kennedy 58 Director
Robert B. Yeakle 57 Director
(1)(c) Identification of Certain Significant Employees. In
addition to its officers and directors, the Company has a
continuing consulting arrangement with Vanderbilt Square Corp., a
publicly held Florida corporation pursuant to which Vanderbilt
Square provides management consultation, financial planning and
day-to-day assistance and administrative support services on an as
needed basis, primarily in this reporting period, as in previous
periods, through the personal efforts and supervision of Ronald A.
Martini, its Vice President and director, who devotes approximately
50% of his time to those activities. In the interest of
maintaining management attention to the Company's operations,
Martini, who is also a principal shareholder of the Company, took
on a primary role with respect to the Company's management and
administration of pending litigation matters. See Part I, Item 3.,
Legal Proceedings. See (1)(e) Business Experience. See Part III,
Item 12. Security Ownership of Certain Beneficial Owners and
Management. Ronald A. Martini is the spouse of the Company's
Secretary/Treasurer and Director, Diane Martini.
Mr. Becker is also President and a Director of Vanderbilt
Square Corp., Mr. Kennedy is legal counsel to the Company and has
also provided legal services to Vanderbilt Square. Mr. Yeakle, who
resigned the presidency of the Company on May 1, 1992, is also a
principal stockholder of Vanderbilt Square Corp.
The Company's officers receive varying assistance and support
in their respective areas from Vanderbilt Square Corp.. The formal
arrangement between the Company and Vanderbilt Square Corp. expired
by its terms during February, 1994 but has continued thereafter on
an as-needed albeit reduced basis.
<PAGE>
(1)(e) Business Experience.
Norman H. Becker has been a director of the Company since July
1, 1987. On January 15, 1993, Mr. Becker was appointed the
Company's President. In addition he has, since its inception, been
an officer and a director of Vanderbilt Square Corp., a publicly
held Florida corporation. Since January, 1985, Mr. Becker has also
been self-employed in the practice of public accounting in
Hollywood, Florida. Mr. Becker is a graduate of City College of
New York (Bernard Baruch School of Business) and is a member of a
number of professional accounting associations including the
American Institute of Certified Public Accountants, the Florida
Institute of Certified Public Accountants and the Dade Chapter of
Florida Institute of Certified Public Accountants.
Frank R. Bauer has been an Officer and a director of the
Company since February 15, 1988 and its Vice President since
January 4, 1993. Mr. Bauer is also President and Chief Executive
Officer of Specialty Device Installers, Inc., a Florida corporation
engaged in outside plant utility and construction contracting. Mr.
Bauer holds the Bachelor of Business Administration Degree from
Stetson University.
Diane Martini has been Secretary/Treasurer and a director of
the Company since January 12, 1993. Ms. Martini is also
Secretary/Treasurer of Vanderbilt Square Corp., an affiliate of the
Company. Ms. Martini is also President and Chief Executive Officer
of Financial Communications, Inc., a privately held Florida public
relations and business consulting firm. Ms. Martini is married to
the Company's principal shareholder, Ronald A. Martini. See Part
IV., Item 12.
Eugene M. Kennedy has been a director of the Company since
March 15, 1989. Mr. Kennedy has also been the Company's legal
counsel since September, 1985. Mr. Kennedy operates his own
private law practice in Fort Lauderdale, Florida. He holds the
Bachelor of Science Degree in Physics from the City University of
New York, has attended the Masters in Business Administration
Program at Adelphi University, in Garden City, New York, and holds
the Juris Doctor Degree from the University of Miami School of Law
in Coral Gables, Florida.
Robert B. Yeakle resigned as an officer of the Company on May
1, 1992. Until that point, he was the Company's President and a
Director and had been since June 22, 1989 and continues as a member
of the Board. In January, 1988 Mr. Yeakle retired from Alexander
Proudfoot & Company in West Palm Beach, Florida, having spent the
prior 21 years in various executive management positions within the
Proudfoot organization, to manage his personal investments.
Alexander Proudfoot & Co. is a $200 million, publicly held
management consulting company which is traded on the London Stock
Exchange. During April, 1991, Mr. Yeakle returned to Alexander
<PAGE>
Proudfoot & Company in an executive capacity and currently devotes
only a minimum of his time to the Company's affairs. Mr. Yeakle
attended the School of Engineering at Rutgers University in New
Brunswick, New Jersey.
Ronald A. Martini is Vice-President and a director of the
Company's affiliate, Vanderbilt Square Corp., a publicly held
Florida corporation. See (1)(c) Identification of Certain
Significant Employees. He is also Vice-President and a director of
Financial Communications, Inc., a privately held public relations
and business consulting firm in Fort Lauderdale, Florida. Mr.
Martini is married to the Company's Secretary/Treasurer and
director, Diane Martini. On April 24, 1990, Martini entered a
guilty plea in the United States District Court for the District of
New Jersey to violations of federal conspiracy, mail fraud and
securities laws in connection with transactions in securities of
public companies unrelated to the Company during a fifteen (15)
month period of 1988 through 1989.
ITEM 11. EXECUTIVE COMPENSATION
Compensation
Messrs. Norman H. Becker and Frank Bauer, devote approximately
10% of their time, respectively, to the Company's affairs. Ms.
Diane Martini currently devotes approximately 80% of her time to
the Company's affairs. There are no employment agreements in
effect or presently contemplated. The total compensation received
by all Executive Officers of the Company during the year ended
December 31, 1995 was received entirely by Diane Martini and
amounted to $36,042.
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long-Term Compensation
Awards Payouts
Name and Other Restricted All
Principal Annual Stock Options/ LTIP Other
Position Year Salary Bonus(2) Compensation Awards SARS Payouts Compensation
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Norman H. Becker 1994 $ -0- -- -- -- -- -- --
President (1) 1995 $ -0- -- -- -- -- -- --
(since 1/15/93)
Frank Bauer (1) 1994 $ -0- -- -- -- -- -- --
Vice-President 1995 $ -0- -- -- -- -- -- --
President
Diane Martini 1994 $35,000 -- -- -- -- -- --
Secretary/ 1995 $36,042 -- -- -- -- -- --
Treasurer
(since 01/12/93)
All Executive 1994 $35,000 -- -- -- -- -- --
Officers & Former 1995 $36,042 -- -- -- -- -- --
Executive Officers
as a Group (3)
Persons (1)
</TABLE>
(1) Mr. Becker received a total of $11,157 in accounting fees from
the Company during 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
<TABLE>
<CAPTION>
(b) Security of Ownership of Management
Name of Amount and Nature Percent
Title of Beneficial of Beneficial of
Class Owner Ownership Class(1)
<S> <C> <C> <C>
Common Stock Diane Martini (2) 85,000 Shares 1.7%
Common Stock Norman H. Becker (2) 40,000 Shares 0.8%
Common Stock Frank R. Bauer 31,500 Shares 0.6%
Common Stock Eugene M. Kennedy 50,000 Shares 0.9%
Common Stock Ronald A. Martini (2) 1,092,806 Shares 21.3%
<PAGE>
Common Stock Robert B. Yeakle (2) 375,000 Shares 7.3%
Common Stock Vanderbilt Square 950,000 Shares 18.5%
Corp. (2)
Common Stock All Officers and
Directors as a Group
(5 persons) 581,500 Shares 11.3%
</TABLE>
(1) Based upon 5,126,900 shares outstanding at March 11, 1996.
(2) Vanderbilt Square Corp. owns 950,000 shares of the Company's
Common Stock at March 11, 1996. Ronald A. Martini, Diane
Martini and Norman H. Becker are also officers, directors and
principal shareholders of Vanderbilt Square Corp. Diane
Martini and Ronald A. Martini are married to each other.
Robert B. Yeakle is also a principal shareholder of Vanderbilt
Square Corp. See Part III, Item 10. "Business Experience".
All four individuals disclaim any beneficial ownership
interest in the Company's Common Stock owned by Vanderbilt
Square Corp. See Item 8., Financial Statements - Notes to
Consolidated Financial Statement, Note F.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
On February 23, 1989, the Company and Vanderbilt Square Corp.
entered into a continuing consulting arrangement pursuant to which
Vanderbilt assisted the Company in its operations, provided access
to potential financing sources if needed and provided consultation
and services related to administrative, bookkeeping and accounting
matters. The formal consulting agreement expired by its terms on
February 23, 1994 and the arrangement has continued thereafter on
an as-needed albeit reduced, basis. During 1995, the Company paid
Vanderbilt Square Corp. a total of $18,000 for such services.
In addition, the Company paid a total of $79,800 to various
affiliates of the Company's principal shareholder, Ronald A.
Martini, in the nature of consulting fees, rentals and office and
administrative services. See "Financial Statements - Notes to
Consolidated Financial Statements, Note G".
Certain Business Relationships
During the year ended December 31, 1995, the Company paid its
director, Eugene M. Kennedy, $4,471 in legal fees and costs
reimbursement in connection with legal services rendered to the
Company by his law firm.
<PAGE>
In addition, the Company paid its President and director,
Norman H. Becker accounting fees of $11,157.
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
ON FORM 8-K
Financial Statements:
Report of Independent Certified Public Accountant.
Consolidated Balance Sheet - December 31, 1995 and
December 31, 1994.
Consolidated Statement of Operations - Three Years Ended
December 31, 1995.
Consolidated Statement of Shareholders' Equity - Three
Years Ended December 31, 1995.
Consolidated Statement of Cash Flows - Three Years Ended
December 31, 1995.
Notes to Consolidated Financial Statements.
2. Schedules:
Schedule I Marketable Securities - Other Investments
Schedule II Amounts Receivable from Related Parties,
Underwriters, Promoters and Employees
other than Related Parties
Schedule VIII Valuation and Qualifying Accounts
Schedule X Supplementary Income Statement
Information
All other financial statements not listed have been
omitted since the required information is included in the
financial statements or the notes thereto, or is not
applicable or required.
Exhibits:
Articles of Incorporation and By-Laws:
Articles of Incorporation and By-Laws incorporated by
reference to the filing of the original registration
statement on Form S-18.
<PAGE>
Instruments defining the rights of security holders,
including indentures:
Not applicable.
Voting Trust Agreement:
Not applicable.
Material Contracts:
Not applicable.
Statement Re: Computation of per share income (loss):
See Note "A"., Notes to Consolidated Financial Statements
and Statement of Operations Three Years Ended December
31, 1995.
Statements RE: Computation of Ratios:
Not applicable.
Annual Report to Security Holders, Form 10-Q or quarterly
report to security holders:
Not applicable.
Letter re: Change in accounting principles:
Not applicable.
Previously unfiled documents:
Not applicable.
Other Documents or Statements to Security Holders:
Not applicable.
Subsidiaries of the Registrant:
Corrections Services International, Inc.
Published report regarding matters submitted to vote of
Security Holders:
Not applicable.
<PAGE>
Consents of experts and counsel:
Not applicable.
Power of Attorney:
Not applicable.
Additional Exhibits:
The Registrant filed no current reports on Form 8-K
during the fourth quarter of 1995.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of
Fort Lauderdale, State of Florida, on the 27th day of March, 1996.
CORRECTIONS SERVICES, INC.
BY:/S/ Norman H. Becker
Norman H. Becker, President
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the Registrant in the capacities and on the dates indicated.
Signatures Title Date
(i) Principal Executive Officer President March 27, 1996
/S/ Norman H. Becker
Norman H. Becker
(ii) Principal Financial and Secretary March 27, 1996
Accounting Officer
/S/ Diane Martini
Diane Martini
(iii) A Majority of the Board Director March 27, 1996
of Directors
/S/ Frank Bauer Director March 27, 1996
Frank Bauer
/S/ Norman H. Becker Director March 27, 1996
Norman H. Becker
/S/ Eugene M. Kennedy Director March 27, 1996
Eugene M. Kennedy
Director March 27, 1996
Robert B. Yeakle
<PAGE>
CONTENTS
PAGE
AUDITOR'S REPORT. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
CONSOLIDATED BALANCE SHEET. . . . . . . . . . . . . . . . . . . . . . . . . 2
CONSOLIDATED STATEMENT OF OPERATIONS. . . . . . . . . . . . . . . . . . . . 3
CONSOLIDATED STATEMENT OF CHANGES IN
SHAREHOLDERS' EQUITY (DEFICIENCY) . . . . . . . . . . . . . . . . . . . . 4
CONSOLIDATED STATEMENT OF CASH FLOWS. . . . . . . . . . . . . . . . . . . . 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . .6-12
<PAGE>
Board of Directors and Shareholders
Corrections Services, Inc. and Subsidiary
Fort Lauderdale, Florida
INDEPENDENT AUDITOR'S REPORT
I have audited the accompanying consolidated balance sheets of
Corrections Services, Inc. and Subsidiary as of December 31, 1995 and
1994, and the related consolidated statements of operations and
shareholders' equity and cash flows for each of the three years ended
December 31, 1995. These consolidated financial statements are the
responsibility of the Company's management. My responsibility is to
express an opinion on these consolidated financial statements based on
my audits.
I conducted my audits in accordance with generally accepted auditing
standards. Those standards require that I plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the consolidated financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall
consolidated financial statement presentation. I believe that my audits
provide a reasonable basis for my opinion.
In my opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Corrections Services, Inc. and Subsidiary as of December 31,
1995 and 1994, and the results of its consolidated operations and its
consolidated cash flows for the three years ended December 31, 1995, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Corrections Services, Inc. and Subsidiary will continue as a going
concern. As more fully described in Note B, the Company has incurred
substantial operating losses in previous years. In addition, a
substantial portion of the Company's sales were made to one customer.
These conditions raise questions about the Company's ability to continue
as a going concern. The Company's continued existence is dependent
upon its ability to preserve its existing
<PAGE>
Board of Directors and Shareholders
Corrections Services, Inc. and Subsidiary
Page Two
working capital, continue to successfully sell its products and continue
to achieve profitable operations. The financial statements do not
include any adjustments to reflect the possible future effects on the
recovery and classification of assets or the amounts and classification
of liabilities that may result from the possible inability of
Corrections Services, Inc. and Subsidiary to continue as a going
concern.
Thomas W. Klash
Certified Public Accountant
Hollywood, Florida
February 7, 1996
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS
1995 1994
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 261,385 $ 264,125
Investment in marketable equity
securities - net of allowance for
market decline of $209,239 in 1995
and $178,438 in 1994 588,830 468,229
Accounts receivable - trade - net of
allowance for uncollectible accounts
of $2,500 in 1995 and 1994 60,290 124,461
Accounts receivable - other 5,996 9,920
Note receivable 10,500 22,000
Inventory 148,196 200,694
Other 4,511 4,148
Total Current Assets 1,079,708 1,093,577
PROPERTY AND EQUIPMENT - net of
accumulated depreciation of $168,181
in 1995 and $165,699 in 1994 5,250 5,290
OTHER 2,278 3,101
$1,087,236 $1,101,968
</TABLE>
See accompanying notes to consolidated financial statements.
-2(a)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
1995 1994
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and
accrued expenses - principally
trade $ 72,802 $ 86,916
Deferred revenue - current 47,580 11,188
Total Current Liabilities 120,382 98,104
DEFERRED REVENUE - Noncurrent 9,851 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; and 5,126,900 outstanding in
1995 and 1994 528 528
Additional paid-in capital 2,095,391 2,095,391
Accumulated deficit (1,112,266) (1,089,549)
983,653 1,006,370
Less treasury stock, 150,000 shares
at cost in 1995 and 1994 respectively (26,650) (26,650)
Total shareholders' equity 957,003 979,720
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,087,236 $ 1,101,968
</TABLE>
-2(b)-
<PAGE>
CORRECTIONS SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Net sales $ 378,638 $ 792,557 $ 554,615
Lease income 1,000 3,994 3,525
Repair and maintenance
fee income 153,631 93,543 23,697
Warranty income - - 30,341
533,269 890,094 612,178
COST AND EXPENSES:
Cost of sales (excluding
depreciation and
amortization) 235,166 341,535 508,694
Depreciation and amortization 5,067 10,282 42,197
Selling, general and
administrative expenses 302,651 356,739 506,917
Interest expense - 22 689
TOTAL OPERATING EXPENSES 542,884 708,578 1,058,497
INCOME (LOSS)
FROM OPERATIONS ( 9,615) 181,516 ( 446,319)
OTHER INCOME (EXPENSE):
Settlement of lawsuit - - 1,672,400
Interest income 12,905 4,571 6,527
Realized and unrealized
gain (loss) on
marketable securities ( 45,147) (145,323) ( 67,361)
Other 19,140 20,648 35,117
( 13,102) (120,104) 1,646,683
INCOME (LOSS) BEFORE
INCOME TAXES AND
EXTRAORDINARY ITEM ( 22,717) 61,412 1,200,364
INCOME TAXES - 72,438 450,000
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM ( 22,717) ( 11,026) 750,364
EXTRAORDINARY ITEM - TAX
BENEFIT OF NET OPERATING
LOSS CARRYFORWARD - 72,438 450,000
</TABLE>
-3(a)-
<PAGE>
CORRECTIONS SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
THREE YEARS ENDED DECEMBER 31, 1994
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
NET INCOME (LOSS) $ ( 22,717) $ 61,412 $ 1,200,364
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 5,126,900 5,179,709 5,181,545
INCOME (LOSS) PER SHARE
BEFORE EXTRAORDINARY ITEM (.004) (.002) .14
EXTRAORDINARY ITEM -- .014 .09
NET INCOME (LOSS) $ (.004) $ .012 $ .23
</TABLE>
See accompanying notes to consolidated financial statements.
-3(b)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Deficiency)
THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
Common Stock
$.0001 Par Value Additional Retained
Authorized 10,000,000 Shares Paid-In Earnings Treasury
Shares Amount Capital (Deficit) Stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance - December 31, 1992 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 the period - - - 1,200,364 - 1,200,364
Balance - December 31, 1993 5,201,900 528 2,095,391 (1,150,961) ( 7,900) 937,058
Net Income for the period - - - 61,412 - 61,412
Purchase of Treasury Shares ( 75,000) - - - ( 18,750) ( 18,750)
Balance - December 31, 1994 5,126,900 528 2,095,391 (1,089,549) ( 26,650) 979,720
Net Loss for the period - - - ( 22,717) - ( 22,717)
Balance - December 31, 1995 5,126,900 $ 528 $ 2,095,391 $(1,112,266) $( 26,650) $ 957,003
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.
-4-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $( 22,717) $ 61,412 $ 1,200,364
Adjustments to reconcile
net income (loss) to net cash
(used in) provided by
operating activities:
Depreciation and amortization 5,067 10,282 42,197
(Gain) on disposition assets ( 925) - -
(Gain) loss on sale of marketable
securities 15,271 7,208 46,142
Allowance for market decline
of securities 30,801 138,115 21,218
Settlement of lawsuit - - (1,422,400)
Change in operating assets
and liabilities:
(Increase) decrease in
trade accounts receivable 64,171 ( 84,565) 3,382
Decrease (increase) in inventory 52,498 ( 25,279) 154,351
(Increase )Decrease in accounts
receivable - other 3,924 ( 3,036) 39,874
Decrease in other assets 242 2,437 54,380
(Decrease) increase in accounts
payable and accrued expenses ( 14,114) ( 1,625) (124,382)
Increase (decrease) in
deferred revenue 22,099 6,179 10,426
Decrease in restricted cash - - 72,499
Purchase of marketable securities (603,515) (230,246) (436,465)
Proceeds from sale of
marketable securities 436,842 235,993 400,110
Total adjustments 12,361 55,463 (1,138,668)
Net cash provided (used in)
operating activities ( 10,356) 116,875 61,696
</TABLE>
Continued on next page
-5(a)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1995
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (Continued)
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM INVESTING
ACTIVITIES:
Advances paid on notes
receivable - affiliate $( 50,000) $ - $ -
Advances paid on notes
receivable - other - ( 10,000) ( 15,000)
Principal collection of
Notes receivable - affiliate 50,000 - -
Principal collection of
notes receivable - other 11,500 3,000 -
Sale of property & equipment 925 - -
Acquisition of treasury stock in
payment of note receivable - - ( 7,900)
Purchase of property and equipment ( 4,809) ( 996) -
Net cash (used) in
investing activities 7,616 (7,996) (22,900)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from borrowing from
affiliates - - 12,500
Principal payments on borrowing
from affiliates - - (10,347)
Purchase of treasury stock - (18,750) -
Net cash provided by (used in)
financing activities - (18,750) 2,153
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (2,740) 90,129 40,949
CASH AND CASH EQUIVALENTS -
Beginning of year 264,125 173,996 133,047
CASH AND CASH EQUIVALENTS -
End of year $ 261,385 $ 264,125 $ 173,996
</TABLE>
See accompanying notes to consolidated financial statements.
-5(b)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Capitalization
Corrections Services, Inc. (the "Company") was incorporated
under the laws of the State of Florida on September 14,
1984. The Company's articles of incorporation originally
provided for the issuance of 100 shares of common stock,
with a par value of $5 per share. On November 13, 1985, the
authorized number of shares was increased to 10,000,000
shares, with a par value of $.0001 per share. In that
connection, the 100 shares of common stock outstanding prior
to that date were exchanged for 2,115,000 shares.
General
The Company commenced its operational activities for
accounting purposes on February 5, 1985. Through December
31, 1986, the Company was principally engaged in
organization, initial marketing, program design and
implementation, as well as system hardware and software
design activities and raising capital. Revenues earned
through December 31, 1986, were primarily the result of test
marketing sales to a limited number of customers. During
1987, the Company successfully installed its equipment in a
number of sites throughout the country.
Business Activity
As a result of agreements reached with its former
manufacturing supplier, the Company sells in-house arrest
systems and now provides maintenance, repair and replacement
of in-house arrest systems previously sold to customers.
The in-house arrest system consists of a computer controlled
electronic signalling system to permit continuous monitoring
of the user's presence or absence from his residence during
the period of the individual's home restriction and
confinement sentence.
Principles of Consolidation
The consolidated financial statements include the accounts
of the Company, and its wholly-owned subsidiary, Corrections
Systems International, Inc. All significant intercompany
accounts and transactions have been eliminated.
-6-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Cash and Cash Equivalents - For purposes of the balance
sheet and statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of
three months or less to be cash equivalents.
Inventory - Inventory which is comprised principally of
computers, monitors, TX's and parts, is valued at the lower
of cost or market using the first-in, first-out method.
Investment in Marketable Equity Securities - The Company's
investment in marketable equity securities consists of
trading securities as defined in FASB Statement No. 115.
Trading securities are carried at market value in the
accompanying balance sheets. Unrealized gains and losses
resulting from fluctuations in the market price of the
related securities are currently reflected in the statement
of operations.
Property and Equipment - Property and equipment is recorded
at cost. Expenditures for major betterments and additions
are charged to the asset accounts, while replacements,
maintenance and repairs which do not improve or extend the
lives of the respective assets are charged to expense
currently.
Depreciation is computed using the straight-line method over
the estimated useful lives of the assets. The estimated
useful lives are as follows:
Computer and monitor equipment 3 years
Molds, dies and tooling costs 5 years
Office furniture and equipment 5 years
Software 3 years
Leasehold improvements 3 years
Product Warranty - The Company warranties its products for
a specified time after a sale. The Company's supplier
warranties its product for a similar time period. Due to
the nature of these warranties, all expenses relating to
repair of units sold is expensed as incurred and,
accordingly, no provision for warranty liability has been
made.
Deferred Revenue - Deferred revenue represents the unearned
portion of customers' payments relating to equipment
maintenance and leasing contracts.
-7-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Net Income (Loss) Per Common Share - Net income (loss) per
common share was computed by dividing the net income (loss)
for each period by the weighted average number of common
shares outstanding during each period.
Research and Development - The Company has expensed all
costs incurred in establishing technological feasibility of
computer software intended for sale to customers. Certain
research and development costs incurred for computer
software are capitalized, such as costs incurred for
producing product masters, including costs for coding and
testing. Such capitalized software costs are amortized over
a three year period.
Revenue Recognition - The Company recognizes revenue at the
time merchandise is shipped to the customers. Installation
and training costs associated with the sale are generally
recorded in the same period.
NOTE B - BASIS OF PRESENTATION
The Company's continued existence is dependent upon its
ability to preserve working capital, obtain an alternative
source of revenues sufficient to absorb operating expenses,
and achieve profitable operations. The Company intends to
reduce its operating expenses and hopes to realize increased
revenues from its repair and maintenance operations.
NOTE C - PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
1995 1994
Leasehold improvements $ 3,170 $ 1,679
Office furniture and equipment 56,427 56,143
Computer and monitoring
equipment 113,834 113,167
173,431 170,989
Less accumulated depreciation
and amortization 168,181 165,699
$ 5,250 $ 5,290
-8-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE D - INCOME TAXES
The components of the provisions for income taxes are as
follows for the three years ended December 31, 1995:
1995 1994 1993
Federal $ - $61,110 $ -
State - 11,328 -
- 72,438 -
Significant components of deferred tax benefits are as
follows:
Current Tax Benefit Assets
Allowance for market decline
of equity securities $ 71,141
Allowance for doubtful accounts 850
Total Current Tax Benefit 71,991
Non-Current Tax Benefit Assets
Tax loss carry forward at
December 31, 1995 268,540
Capital loss carry forward
at December 31, 1995 31,666
Total Non-current Benefit 300,206
Total Current and
Noncurrent Tax Benefit 372,197
Valuation Allowance (372,197)
Net Deferred Tax Assets $ -
At December 31, 1995, management is unable to predict
profitable operations for the Company in the future.
At December 31, 1995, the Company had available net
operating loss carryforwards for financial and tax reporting
purposes of approximately $789,823 and capital loss carry-
forward amounting to approximately $93,000 expiring at
various times through 2006.
The Company adopted Statement of Financial Accounting
Standards No. 109 in 1993. There was no effect on the 1993
financial statements as a result of adopting this statement.
The Company has fully reserved for the benefit of the net
operating loss carry-forwards.
-9-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE E - MAJOR CUSTOMERS
Sales to customers individually representing more than 10%
of combined revenues amount to $244,622 in 1995, $432,796 in
1994, and $382,672 in 1993. In 1995, two customers
accounted for 35% and 12% respectively. In 1994, two
customers accounted for 49% and 10% respectively. In 1993,
two customers accounted for 52% and 11% respectively.
NOTE F - CONSULTING AGREEMENT
On February 23, 1989, the Company entered into a 5-year
agreement with Vanderbilt Square Corp. The agreement
provided that Vanderbilt Square Corp. assist the Company in
its sales and marketing operation, provide access to
potential lenders, provide assistance in administrative,
bookkeeping, and accounting matters, provide in its sole
discretion, up to $200,000 in lease financing, and guarantee
in its sole discretion, payment for product equipment
purchased by the Company. In consideration of the
aforementioned services, the Company paid $233,333
represented by the issuance of 1,000,000 shares of the
Company's restricted common stock during 1990 and 1989. The
agreement expired by its terms on February 23, 1994.
Consulting fees expense relating to this agreement amounted
to a final payment of $3,940 in 1994, and to $46,656 in
1993. The Company paid Vanderbilt Square Corp. a total of
$18,000 during 1995 for services on an as-needed basis.
NOTE G - RELATED PARTY TRANSACTIONS
Professional and Consulting Fees - the Company paid
officers, directors, shareholders and affiliates
professional and consulting fees amounting to $82,228 in
1995, $123,136 in 1994 and $155,161 in 1993.
<PAGE>
Product Repair - Amounts paid for repair of monitoring
units, to a company owned by the Company's then secretary-
treasurer amounted to -0- in 1994 and 1993.
-10-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE G - RELATED PARTY TRANSACTIONS (Contd..)
Office Expense - Office expenses were paid to shareholders
and/or entities affiliated through common officers,
directors and shareholders amounting to $10,200 in 1995,
$20,474 in 1994 and $21,824 in 1993.
Rent Expense - Rentals paid to entities having officers,
directors and shareholders in common with the Company
amounted to $21,000 in 1995, 1994 and 1993.
NOTE H - LITIGATION
The Company was named as a party defendant in an Illinois
action arising for the death of an individual at the hands
of a house arrest detainee. 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 has been appealed. The Company's
litigation counsel is unable to estimate the outcome of this
suit. Management intends to continue to contest the suit
vigorously.
NOTE I - RENTAL COMMITMENTS
Rent expense incurred for the occupancy of general office
and storage facilities amounted to $31,162 in 1995, $30,125
in 1994 and $27,363 in 1993. At December 31, 1995, there
were no fixed annual rental commitments.
NOTE J - INVESTMENTS IN MARKETABLE EQUITY SECURITIES
At December 31, 1995, the Company's investment in marketable
equity securities consisted entirely of trading securities
as follows:
Market
Cost Value
Investments in corporate
equity securities of
related parties $ 56,884 $ 71,974
Investment in corporate
equity securities -
other 741,186 516,856
$798,070 $588,830
-11-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1995 AND 1994
NOTE J - INVESTMENTS IN MARKETABLE EQUITY SECURITIES (Contd..)
The Company adopted FASB No. 115 on January 1, 1994. Prior
to that date the Company's investment in marketable equity
securities were carried at the lower of cost or market. At
December 31, 1993, the Company's portfolio of equity
securities was carried at market value, which was less than
cost.
Unrealized losses on changes in market values of marketable
equity securities amounted to $30,801 in 1995, $138,115 in
1994 and $21,218 in 1993.
-12-
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
ON FINANCIAL STATEMENTS SCHEDULES
Board of Directors and Shareholders
Corrections Services, Inc. and Subsidiary
Ft. Lauderdale, Florida
I have examined the financial statements of Corrections Services,
Inc. and Subsidiary as of December 31, 995 and 1994, and for each
of the three years ended December 31, 1995 and have issued my
report thereon dated February 7, 1995. In connection with my
examination, I also examined the financial statement schedules
listed in Item 14(a)(2). In my opinion, these schedules, when
considered in relation to the basic financial statements, present
fairly in all material respects the information set forth therein.
Thomas W. Klash
Certified Public Accountant
Hollywood, Florida
February 7, 1996
<PAGE>
<TABLE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
MARKETABLE SECURITIES - OTHER INVESTMENTS
DECEMBER 31, 1995
SCHEDULE I
<CAPTION>
Amount at Which Each
Portfolio of Equity
Number of Shares Market Value Security Issues and
or Units - Principal of Each Issue Each Other Security
Name of Issuer and Amount of Bonds Cost of at Balance Issue Carried In The
Title of Each Issue And Notes Each Issue Sheet Date Balance Sheet
<S> <C> <C> <C> <C>
American Waste Products 2,000 $ 7,702 $ 4,000 $ 4,000
Cashtek, Inc. 52,000 48,218 1,560 1,560
Chemical Bank 4,000 100,000 102,000 102,000
CoMed Financial 1,000 25,000 25,750 25,750
Enzo Biochem 2,000 4,134 250 250
Jersey Central 2,000 50,000 52,250 52,250
Little Switzerland 4,000 17,557 15,000 15,000
Ohio Edison 1,000 25,000 26,125 26,125
Time Warner 1,000 25,000 25,500 25,500
Niagra Mohawk Power 1,000 23,997 23,625 23,625
Magnum Petroleum 30,000 99,212 86,250 86,250
Nevada Power 1,000 23,512 22,250 22,250
North American Gov't. 616 6,075 5,196 5,196
Oxford Capital Corp. 10,000 8,880 20,000 20,000
Parallel Technologies 245,000 210,778 49,000 49,000
RJR Nabisco 3,000 75,000 78,000 78,000
The Rothchild Companies, Inc. 2,000 - 100 100
Vanderbilt Square Corp.* 552,914 48,005 51,974 51,974
$798,070 $588,830 $588,830
</TABLE>
Note: Balance Sheet valuation based upon
aggregated lower of cost or market
* Companies affiliated through common
management and principal shareholders
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
MARKETABLE SECURITIES - OTHER INVESTMENTS
DECEMBER 31, 1994
SCHEDULE I
<TABLE>
<CAPTION>
Amount at Which Each
Portfolio of Equity
Number of Shares Market Value Security Issues and
or Units - Principal of Each Issue Each Other Security
Name of Issuer and Amount of Bonds Cost of at Balance Issue Carried In The
Title of Each Issue And Notes Each Issue Sheet Date Balance Sheet
<S> <C> <C> <C> <C>
Cashtek, Inc. 22,000 $ 37,638 $ 6,160 $ 6,160
Chemical Bank 4,000 100,000 90,000 90,000
Enzo Biochem 2,000 22,702 22,500 22,500
Magnum Petroleum 5,000 21,502 21,250 21,250
Morgan Stanley Financial 1,000 25,000 20,750 20,750
Nevada Power 1,000 23,512 20,375 20,375
North American Gov't. 569 5,696 4,479 4,479
Oxford Capital Corp.* 132,000 60,358 115,500 115,500
Parallel Technologies 118,000 232,229 73,750 73,750
RJR Nabisco 3,000 75,000 61,125 61,125
Rothchild Companies, Inc.* 2,000 - 40 40
Texas Utility 1,000 25,000 20,000 20,000
Vanderbilt Square Corp.* 205,000 18,030 12,300 12,300
$646,667 $468,229 $468,229
</TABLE>
Note: Balance Sheet valuation based upon
aggregated lower of cost or market
*Companies affiliated through common
management and principal shareholders
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1995
<TABLE>
<CAPTION>
Balance at Charged to Balance
Beginning Charged to Other Accounts Deductions at End of
Description Period Costs & Expenses -Describe- -Describe- Period
<S> <C> <C> <C> <C> <C>
Allowance for market
decline of investment in
marketable securities $ 178,438 $ 30,801 $ - $ - $209,239
Allowance for doubtful
accounts $ 2,500 $ - $ - $ $ 2,500
</TABLE>
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1994
<TABLE>
<CAPTION>
Balance at Charged to Balance
Beginning Charged to Other Accounts Deductions at End of
Description Period Costs & Expenses -Describe- -Describe- Period
<S> <C> <C> <C> <C> <C>
Allowance for market
decline of investment in
marketable securities $ 40,323 $138,115 $ - $ - $178,438
Allowance for doubtful
accounts $ 2,500 $ - $ - $ $ 2,500
</TABLE>
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1993
<TABLE>
<CAPTION>
Balance at Charged to Balance at
Beginning Charged to Other Accounts Deductions End of
Description Period Costs and Expenses -Describe- -Describe- Period
<S> <C> <C> <C> <C> <C>
Allowance for market
decline of investment
in marketable equity
securities $ 19,105 $ 21,218 $ - $ - $ 40,323
Allowance for doubtful
accounts $ 55,490 $ - $ - $ 52,990(a) $ 2,500
</TABLE>
Notes
(a) Written off to gain extinguishment of debt.
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
DECEMBER 31, 1995
Charged to Costs
Item and Expenses
1. Maintenance and repairs $ 12,387
2. Depreciation and amortization (1)
3. Taxes, other than payroll
and income taxes 6,639
4. Royalties -
5. Advertising -
(1) Less than 1% of revenues.
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
DECEMBER 31, 1994
Charged to Costs
Item and Expenses
1. Maintenance and repairs (1)
2. Depreciation and amortization $ 10,282
3. Taxes, other than payroll
and income taxes (1)
4. Royalties -
5. Advertising -
(1) Less than 1% of revenues.
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
DECEMBER 31, 1993
Charged to Costs
Item and Expenses
1. Maintenance and repairs (1)
2. Depreciation and amortization $ 41,979
3. Taxes, other than payroll
and income taxes 12,224
4. Royalties -
5. Advertising -
(1) Less than 1% of revenues.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Consolidated
Balance Sheets, Consolidated Statement of Operations, Consolidated Statement of
Changes in Shareholders' Equity, Consolidated Statement of Cash Flows and Notes
thereto incorporated in Part II, Item 8. of this Form 10-K and is qualified in
its entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 261,385
<SECURITIES> 588,830
<RECEIVABLES> 79,286
<ALLOWANCES> (2,500)
<INVENTORY> 148,196
<CURRENT-ASSETS> 1,079,708
<PP&E> 173,431
<DEPRECIATION> 168,181
<TOTAL-ASSETS> 1,087,236
<CURRENT-LIABILITIES> 120,382
<BONDS> 0
528
0
<COMMON> 0
<OTHER-SE> 983,125
<TOTAL-LIABILITY-AND-EQUITY> 1,087,236
<SALES> 378,638
<TOTAL-REVENUES> 533,269
<CGS> 235,166
<TOTAL-COSTS> 542,884
<OTHER-EXPENSES> 45,147
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (22,717)
<INCOME-TAX> 0
<INCOME-CONTINUING> (22,717)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,717)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
