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, 1996
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)
(954) 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 February 27, 1997, was approximately $445,000.
The number of shares of Common Stock, $.0001 par value, of the Registrant
issued as of February 27, 1997, 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
<PAGE>
the system assets and release from its non-compete 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 by settlement of the
litigation against Marconi in mid-1993. The Company re-entered the
marketplace depending upon its newly acquired, finished equipment inventory.
The Company intends to consider alternative manufacturing options for possible
future implementation prior to potential exhaustion, if any, of its finished
equipment inventory. There can be no assurances that the Company will be able
to implement one or more manufacturing options in the event of a need to do
so. If unable to do so when and if needed, the Company will be adversely
affected.
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 $818 per month ($9,816 per
annum).
<PAGE>
ITEM 3. LEGAL PROCEEDINGS
The Company is not now a party to any litigation or, to its knowledge,
threatened litigation.
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 1996, 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 CRSE. 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, 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
Second Quarter, 1996 $0.18 $0.125 $0.25 $0.18
Third Quarter, 1996 $0.18 $0.125 $0.25 $0.18
Fourth Quarter, 1996 $0.18 $0.125 $0.25 $0.18
January 1, through
February 27, 1997 $0.18 $0.125 $0.25 $0.18
</TABLE>
(b) Holders. As of February 27, 1997, the approximate number of
recordholders of Common Stock of the Registrant was 612.
The Company is unable to determine the actual number of beneficial
holders of its Common Stock at February 27, 1997 due to Common Stock held for
stockholders "in street name" but estimates the current total to be
approximately 1,020.
(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>
ITEM 6. SELECTED FINANCIAL DATA
Summary of Statement of Operations:
<TABLE>
<CAPTION>
As of As of As of As of As of
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
<S> <C> <C> <C> <C> <C>
Revenue $ 552,441 $ 533,269 $ 890,094 $ 612,178 $ 655,309
Oper. Exp. $ 532,331 $ 542,884 $ 708,578 $1,058,497 $1,831,620
Net Income (Loss) $ 113,003 ($ 22,717) $ 61,412 $1,200,364
($1,145,708)
Weighted No. of
shs. outstanding 5,126,900 5,126,900 5,179,709 5,181,545 5,181,545
Net Income (Loss)
per sh. Common
Stk. outstanding $ .02 ($ .004) $ .01 $ .23 ( $.22 )
(See Note A-Notes
to Fin. Stmts.)
Summary Balance Sheet Information
As of As of As of As of As of
12/31/96 12/31/95 12/31/94 12/31/93 12/31/92
Total Assets $1,205,096 $1,087,236 $1,101,968 $1,032,050 $2,043,688
Total Current $ 135,090 $ 120,382 $ 98,104 $ 85,314 $2,282,599
Liabilities
Tot. Current Assets $1,199,917 $1,079,708 $1,093,577 $1,015,736 $1,945,207
Stkholders' Equity $1,070,006 $ 957,003 $ 979,720 $ 937,058 ($ 255,406)
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, 1996 the Company had
current assets of $1,199,917 compared to $1,079,708 at December 31, 1995,
total assets of $1,205,096 compared to $1,087,236 at December 31, 1995 and
shareholders equity of $1,070,006 as compared to $957,003 as of December 31,
1995. The increase of its current assets and total assets were primarily the
result of the Company's increase in cash and marketable trading securities.
The Shareholders equity at December 31, 1996 increased to $1,070,006, from
$957,003 at December 31, 1995. The increase was primarily the result of
earnings of $113,003 for the year ended December 31, 1996.
The Company realized net income for the year which increased shareholders
equity from $957,003 at year end 1995, to $1,070,006 at year end 1996.
<PAGE>
Liquidity. The Company had a net increase in cash and cash equivalents
for the year ended December 31, 1996 of $75,293, and cash and cash equivalents
at the end of the year of $336,678 as compared to a decrease in cash and cash
equivalents of $2,740, and cash and cash equivalents of $261,385 for the year
ended December 31, 1995. 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, 1996, were derived from sales, lease income and repairs and
maintenance income.
The Company's revenues increased to $552,441 for the fiscal year ended
December 31, 1996, as compared to $533,269 for the same period of 1995. The
principal reason for the increase was increased repair, maintenance and lease
income.
Operating expenses decreased to $532,331 as compared to $542,884 for the
same period last year principally due to a decrease in cost of sales. The
Company realized net income of $113,003 for the fiscal year ended December 31,
1996, as compared to a net loss of ($22,717) for the same period last year.
The increase in net income was primarily due to decreased cost of sales.
The operating expenses decrease in the period ended December 31, 1996 of
$10,553 in comparison to 1995 was primarily attributable to decreases in both
cost of sales and in selling, general and administrative expenses.
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,
1996.
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
<TABLE>
<CAPTION>
Name Age Offices Held
<S> <C> <C>
Norman H. Becker 59 President/Director
Frank Bauer 52 Vice President/Director
Diane Martini 49 Secretary/Treasurer/Director
Eugene M. Kennedy 59 Director
Robert B. Yeakle 58 Director
</TABLE>
(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 provided 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, Vanderbilt's former Vice President and director, who devoted
approximately 50% of his time in this reporting period to those activities.
Mr. Martini is also a principal shareholder of the Company. In November of
1996, Mr. Martini resigned as an officer and director of Vanderbilt and is no
longer active under the consulting agreement. 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 Proudfoot & Company in an
<PAGE>
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 was, until November, 1996, 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, 1996 was received entirely by Diane Martini and
amounted to $37,333.
<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 1995 $ -0- -- -- -- -- -- --
President (1) 1996 $ -0- -- -- -- -- -- --
(since 1/15/93)
Frank Bauer (1) 1995 $ -0- -- -- -- -- -- --
Vice-President 1996 $ -0- -- -- -- -- -- --
President
Diane Martini 1995 $36,042 -- -- -- -- -- --
Secretary/ 1996 $37,333 -- -- -- -- -- --
Treasurer
(since 01/12/93)
All Executive 1995 $36,042 -- -- -- -- -- --
Officers & Former 1996 $37,333 -- -- -- -- -- --
Executive Officers
as a Group (3)
Persons (1)
</TABLE>
(1) Mr. Becker received a total of $15,818 in accounting fees from the
Company during 1996.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(b) Security of Ownership of Management
<TABLE>
<CAPTION>
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%
<PAGE>
Common Stock Ronald A. Martini (2) 1,125,806 Shares 22.0%
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 February 27, 1997.
(2) Vanderbilt Square Corp. owns 950,000 shares of the Company's Common
Stock at February 27, 1997. Ronald A. Martini, Diane Martini and
Norman H. Becker are also officers, directors and principal
shareholders of Vanderbilt Square Corp. 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 1996, the Company paid
Vanderbilt Square Corp. a total of $ -0- for such services.
In addition, the Company paid a total of $86,300 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, 1996, the Company paid its director,
Eugene M. Kennedy, $4,105 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 $15,818.
<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, 1996 and December 31, 1995.
Consolidated Statement of Operations - Three Years Ended December 31,
1996.
Consolidated Statement of Shareholders' Equity - Three Years Ended
December 31, 1996.
Consolidated Statement of Cash Flows - Three Years Ended December 31,
1996.
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, 1996.
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 1996.
<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 21st day of March, 1997.
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 21, 1997
/S/ Norman H. Becker
Norman H. Becker
(ii) Principal Financial and Secretary March 21, 1997
Accounting Officer
/S/ Diane Martini
Diane Martini
(iii) A Majority of the Board Director March 21, 1997
of Directors
/S/ Frank Bauer Director March 21, 1997
Frank Bauer
/S/ Norman H. Becker Director March 21, 1997
Norman H. Becker
Director March __, 1997
Eugene M. Kennedy
/S/ Robert B. Yeakle Director March 21, 1997
Robert B. Yeakle
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
FINANCIAL STATEMENTS
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, 1996
and 1995, and the related consolidated statements of operations and
shareholders' equity and cash flows for each of the three years
ended December 31, 1996. 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, 1996 and 1995, and the results of its consolidated
operations and its consolidated cash flows for the three years
ended December 31, 1996, 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.
/s/Thomas W. Klash
Thomas W. Klash
Certified Public Accountant
Hollywood, Florida
January 30, 1997
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
ASSETS
1996 1995
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 336,678 $ 261,385
Investment in marketable trading
securities - at market 660,769 588,830
Accounts receivable - trade - net of
allowance for uncollectible accounts
of $2,500 in 1996 and 1995 62,710 60,290
Accounts receivable - other 7,701 5,996
Note receivable -- 10,500
Inventory 127,255 148,196
Other 4,804 4,511
Total Current Assets 1,199,917 1,079,708
PROPERTY AND EQUIPMENT - net of
accumulated depreciation of $135,442
in 1996 and $168,181 in 1995 2,941 5,250
OTHER 2,238 2,278
$1,205,096 $1,087,236
</TABLE>
See accompanying notes to consolidated financial statements.
-2(a)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1996 AND 1995
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
1996 1995
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and
accrued expenses - principally
trade $ 60,860 $ 72,802
Deferred revenue - current 74,230 47,580
Total Current Liabilities 135,090 120,382
DEFERRED REVENUE - Noncurrent -- 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; and 5,126,900 outstanding in
1996 and 1995 528 528
Additional paid-in capital 2,095,391 2,095,391
Accumulated deficit ( 999,263) (1,112,266)
1,096,656 983,653
Less treasury stock, 150,000 shares
at cost in 1996 and 1995 respectively (26,650) (26,650)
Total shareholders' equity 1,070,006 957,003
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,205,096 $ 1,087,236
</TABLE>
-2(b)-
<PAGE>
CORRECTIONS SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Net sales $ 300,440 $ 378,638 $ 792,557
Lease income 69,392 1,000 3,994
Repair and maintenance
fee income 182,609 153,631 93,543
552,441 533,269 890,094
COST AND EXPENSES:
Cost of sales (excluding
depreciation and
amortization) 229,464 235,166 341,535
Depreciation and amortization 2,727 5,067 10,282
Selling, general and
administrative expenses 300,140 302,651 356,739
Interest expense - - 22
TOTAL OPERATING EXPENSES 532,331 542,884 708,578
INCOME (LOSS)
FROM OPERATIONS 20,110 ( 9,615) 181,516
OTHER INCOME (EXPENSE):
Dividend and Interest Income 41,179 37,740 27,755
Realized and unrealized
gain (loss) on
marketable securities 52,225 ( 46,072) (145,323)
Other ( 511) ( 4,770) ( 2,536)
92,893 ( 13,102) (120,104)
INCOME (LOSS) BEFORE
INCOME TAXES AND
EXTRAORDINARY ITEM 113,003 ( 22,717) 61,412
INCOME TAXES - - 72,438
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 133,003 ( 22,717) ( 11,026)
EXTRAORDINARY ITEM - TAX
BENEFIT OF NET OPERATING
LOSS CARRYFORWARD - - 72,438
</TABLE>
-3(a)-
<PAGE>
CORRECTIONS SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
THREE YEARS ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
NET INCOME (LOSS) $ 113,003 $ ( 22,717) $ 61,412
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 5,126,900 5,126,900 5,179,709
INCOME (LOSS) PER SHARE
BEFORE EXTRAORDINARY ITEM .02 (.004) (.002)
EXTRAORDINARY ITEM -- -- .014
NET INCOME (LOSS) $ .02 $ (.004) $ .012
</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, 1996
<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, 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
Net Income for the period - - - 113,003 - 113,003
Balance - December 31, 1996 5,126,900 $ 528 $ 2,095,391 ($ 999,263) ( $ 26,650) $1,070,006
</TABLE>
Shown on the accompanying
Balance Sheet as follows:
Issued: 5,276,900
Treasury shares (150,000)
5,126,900
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 113,003 ($ 22,717) $ 61,412
Adjustments to reconcile
net income (loss) to net cash
(used in) provided by
operating activities:
Depreciation and amortization 2,692 5,067 10,282
(Gain) on disposition assets - ( 925) -
(Gain) loss on sale of marketable
securities ( 140,450) 15,271 7,208
Allowance for market decline
of securities 88,225 30,801 138,115
Write off uncollectable notes 10,500 - -
Change in operating assets
and liabilities:
(Increase) decrease in
trade accounts receivable ( 2,420) 64,171 ( 84,565)
Decrease (increase) in inventory 21,426 52,498 ( 25,279)
(Increase )Decrease in accounts
receivable - other ( 1,705) 3,924 ( 3,036)
(Increase) Decrease in other assets ( 253) 242 2,437
(Decrease) increase in accounts
payable and accrued expenses ( 11,942) ( 14,114) ( 1,625)
Increase (decrease) in
deferred revenue 16,799 22,099 6,179
Purchase of marketable securities (745,411) (603,515) (248,996)
Proceeds from sale of
marketable securities 725,697 436,842 235,993
Total adjustments ( 36,842) 12,361 36,713
Net cash provided (used in)
operating activities 76,161 ( 10,356) 98,125
</TABLE>
Continued on next page
-5(a)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
THREE YEARS ENDED DECEMBER 31, 1996
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
(Continued)
<TABLE>
<CAPTION>
1996 1995 1994
<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)
Principal collection of
notes receivable - affiliate - 50,000 -
Principal collection of
notes receivable - other - 11,500 3,000
Sale of property & equipment - 925 -
Purchase of property and equipment ( 868) (4,809) ( 996)
Net cash (used) in
investing activities ( 868) 7,616 ( 7,996)
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 75,293 (2,740) 90,129
CASH AND CASH EQUIVALENTS -
Beginning of year 261,385 264,125 173,996
CASH AND CASH EQUIVALENTS -
End of year $ 336,678 $ 261,385 $ 264,125
</TABLE>
See accompanying notes to consolidated financial statements.
-5(b)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
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, 1996 AND 1995
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 Trading Securities - The Company's
investment in marketable trading 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, 1996 AND 1995
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:
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Leasehold improvements $ 3,170 $ 3,170
Office furniture and equipment 55,784 56,427
Computer and monitoring
equipment 79,429 113,834
138,383 173,431
Less accumulated depreciation
andamortization 135,442 168,181
$ 2,941 $ 5,250
</TABLE>
-8-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE D - INCOME TAXES
The components of the provisions for income taxes are as follows
for the three years ended December 31, 1996:
1996 1995 1994
[S] [C] [C] [C]
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 $ 101,138
Allowance for doubtful accounts 850
Total Current Tax Benefit $ 101,988
Non-Current Tax Benefit Assets
Tax loss carry forward at
December 31, 1996 $ 231,660
Total Non-current Benefit $ 231,660
Total Current and
Noncurrent Tax Benefit $ 333,648
Valuation Allowance $(333,648)
Net Deferred Tax Assets $ -
At December 31, 1996, management is unable to predict profitable
operations for the Company in the future.
At December 31, 1996, the Company had available net operating
loss carryforwards for financial and tax reporting purposes of
approximately $681,354 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, 1996 AND 1995
NOTE E - MAJOR CUSTOMERS
Sales to customers individually representing more than 10% of
combined revenues amount to $174,188 in 1996, $244,622 in 1995
and $432,796 in 1994. In 1996, two customers accounted for 22%
and 10% respectively. In 1995, two customers accounted for 35%
and 12% 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, 1995.
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 $-0- and
$18,000 during 1996 and 1995 respectively, 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 $75,023 in 1996, $82,228 in 1995
and $123,136 in 1994.
-10-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
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 $5,817 in 1996, $10,200 in 1995,
$20,474 in 1994.
Rent Expense - Rentals paid to entities having officers,
directors and shareholders in common with the Company amounted
to $21,000 in 1996, 1995 and 1994.
NOTE H - RENTAL COMMITMENTS
Rent expense incurred for the occupancy of general office and
storage facilities amounted to $30,759 in 1996, $31,162 in 1995
and $30,125 in 1994. At December 31, 1996, there were no fixed
annual rental commitments.
NOTE I - INVESTMENTS IN MARKETABLE EQUITY SECURITIES
At December 31, 1996, the Company's investment in marketable
equity securities consisted entirely of trading securities as
follows:
Market
Cost Value
Investments in corporate
trading securities of
related parties $ 31,490 $ 32,272
Investment in corporate
trading securities -
other 926,744 628,497
$958,234 $660,769
NOTE J - CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially subject the Company to
concentrations of credit risk consist principally of temporary
cash investments, investments in marketable securities and
accounts receivable. The Company places its cash investments
and investments in marketable securities with high quality
institutions and limits the amount of credit exposure to any
one institution or investee. Concentrations of credit risk
with respect to accounts receivable are limited, due to the
relatively small average balance per customer and their dispersion
across several geographical areas. The Company generally does
not require collateral or other security to support customer
receivables.
NOTE K - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following notes sumarize the major methods and assumptions
used in estimating the fair values of financial instruments:
Cash and Cash Equivalents
The carrying amount approximates fair market value due to
the liquidity of these financial instruments.
Investments
The fair values of investments are based upon quoted
market prices for those investments.
Accounts Receivable
The fair value of customer receivables is based upon net
realizable value.
-11-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996 AND 1995
NOTE I - INVESTMENTS IN MARKETABLE TRADING SECURITIES (Contd..)
The Company adopted FASB No. 115 on January 1, 1994. Prior to
that date the Company's investment in marketable trading
securities were carried at the lower of cost or market. At
December 31, 1993, the Company's portfolio of trading securities
was carried at market value, which was less than cost.
Unrealized losses on changes in market values of marketable
trading securities amounted to $88,225 in 1996, $30,801 in 1995
and $138,115 in 1994.
-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, 1996 and 1995, and for each of the
three years ended December 31, 1996 and have issued my report thereon
dated January 30, 1997. 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.
/S/Thomas W. Klash
Thomas W. Klash
Certified Public Accountant
Hollywood, Florida
January 30, 1997
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
MARKETABLE SECURITIES - OTHER INVESTMENTS
DECEMBER 31, 1996
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>
Atlantic Cap 1,000 $ 25,000 $ 24,750 $ 24,750
Cashtek, Inc. 77,000 48,563 385 385
Chase Manhattan Bank 2,000 50,000 50,750 50,750
CoMed Financial 1,000 25,000 25,000 25,000
Jersey Central 2,000 50,000 50,750 50,750
Ohio Edison 1,000 25,000 25,625 25,625
Time Warner 1,000 25,000 25,125 25,125
North American Gov't. 650 6,355 5,405 5,405
American Gaming Intl Inc. 49,500 84,017 23,265 23,265
Parallel Technologies 459,500 213,063 4,595 4,595
RJR Nabisco 3,000 75,000 75,375 75,375
Pacificorp 1,000 25,000 25,125 25,125
Claires Stores 1,000 15,122 13,125 13,125
Claires Stores (Calls) 20 6,010 7,250 7,250
Conseco Fin 1,000 25,000 25,250 25,250
Extended Stay America 500 6,886 10,063 10,063
Florida Panthers 500 8,625 8,625 8,625
Future Healthcare 10,000 383 200 200
Guardian Intl Inc 4,500 21,082 7,875 7,875
Hanson PLC Spon Adr 3,200 34,364 21,600 21,600
Imperial Tobacco 800 8,591 10,224 10,224
Millenium Chemical 307 4,117 5,449 5,449
Montana Power 2,000 50,000 52,000 52,000
PSE&G Cap 1,000 25,000 25,375 25,375
Republic Industries 2,500 41,753 77,813 77,813
Republic Industries (Calls) 10 2,769 2,375 2,375
U.S. West Fin 1,000 25,000 25,123 25,123
Vanderbilt Square Corp.* 201,700 31,490 32,272 32,272
$958,235 $ 660,769 $660,769
</TABLE>
* Companies affiliated through common
management and principal shareholders
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
MARKETABLE SECURITIES - OTHER INVESTMENTS
DECEMBER 31, 1995
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 ofat 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>
* 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>
* Companies affiliated through common
management and principal shareholders
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
DECEMBER 31, 1996
<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 $ 209,239 $ 88,225 $ - $ - $ 297,464
Allowance for doubtful
accounts $ 2,500 $ - $ - $ - $ 2,500
</TABLE>
<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 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 $ 40,323 $ 138,115 $ - $ - $ 178,438
Allowance for doubtful
accounts $ 2,500 $ - $ - $ - $ 2,500
</TABLE>
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
SCHEDULE X
SUPPLEMENTARY INCOME STATEMENT INFORMATION
DECEMBER 31, 1996
Charged to Costs
Item and Expenses
1. Maintenance and repairs $ 9,576
2. Depreciation and amortization (1)
3. Taxes, other than payroll
and income taxes 6,644
4. Royalties -
5. Advertising -
(1) Less than 1% of revenues.
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.
<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 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> 1-MO
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 336,678
<SECURITIES> 660,769
<RECEIVABLES> 72,911
<ALLOWANCES> 2,500
<INVENTORY> 127,255
<CURRENT-ASSETS> 1,199,917
<PP&E> 138,383
<DEPRECIATION> 135,442
<TOTAL-ASSETS> 1,205,096
<CURRENT-LIABILITIES> 135,090
<BONDS> 0
0
0
<COMMON> 528
<OTHER-SE> 1,069,478
<TOTAL-LIABILITY-AND-EQUITY> 1,205,096
<SALES> 300,440
<TOTAL-REVENUES> 552,441
<CGS> 229,464
<TOTAL-COSTS> 532,331
<OTHER-EXPENSES> 511
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 113,003
<INCOME-TAX> 0
<INCOME-CONTINUING> 113,003
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 113,003
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
