SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[XX] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
33-02035-A
(Commission File Number)
CORRECTIONS SERVICES, INC.
(Exact name of Registrant as specified in its charter)
Florida 59-2508470
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
3040 East Commercial Boulevard
Fort Lauderdale, Florida 33308
(Address of Principal Executive Offices)
(954) 772-2297
(Registrant's Telephone Number)
None
(Former Name, Former Address and former Fiscal Year,
if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
YES NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the Issuer's classes of
common stock, as of the latest practicable date.
5,276,900 SHARES OF COMMON STOCK, OF $.0001 PAR VALUE, WERE ISSUED AT
JULY 26, 1997, INCLUDING 150,000 SHARES HELD BY THE ISSUER IN TREASURY.
5,126,900 SHARES WERE OUTSTANDING AT JULY 26, 1997.
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1997 (Unaudited) and December 31, 1996
(Audited).
Consolidated Statement of Operations - Three months and six months ended June
30, 1997 and 1996 (Unaudited).
Consolidated Statement of Shareholders' Equity - December 31, 1993 through
June 30, 1997.
Consolidated Statement of Cash Flows - Six months ended June 30, 1997 and 1996
(Unaudited).
Notes to Consolidated Financial Statements.
Item 2.Management's Discussion and Analysis of Financial Condition and
Results of Operations.
PART II. OTHER INFORMATION
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 227,537 $ 336,678
Investment in marketable
trading securities - at
market 657,745 660,769
Accounts receivable - trade - net
of allowance for uncollectable
accounts of $2,500 in 1997 and 1996 52,317 62,710
Accounts receivable - other 13,010 7,701
Inventory 131,283 127,255
Other 9,143 4,804
TOTAL CURRENT ASSETS 1,091,035 1,199,917
PROPERTY AND EQUIPMENT - net of
accumulated depreciation of $136,362
in 1997 and $135,442 in 1996 2,021 2,941
Other 2,293 2,238
TOTAL ASSETS $1,095,349 $1,205,096
</TABLE>
See accompanying notes to consolidated financial statements.
-4(a)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Continued)
LIABILITIES AND SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued
expenses - principally trade $ 54,724 $ 60,860
Deferred revenue 16,782 74,230
TOTAL CURRENT LIABILITIES 71,506 135,090
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock $.0001 par value;
10,000,000 shares authorized;
5,276,900 shares issued in
1997 and 1996; 5,126,900 shares
outstanding in 1997 and 1996 528 528
Additional paid-in capital 2,095,391 2,095,391
Accumulated deficit ( 1,045,426) ( 999,263)
1,050,493 1,096,656
Less treasury stock, 150,000
shares at cost in 1997 and 1996 ( 26,650) ( 26,650)
TOTAL SHAREHOLDERS' EQUITY 1,023,843 1,070,006
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,095,349 $ 1,205,096
</TABLE>
See accompanying notes to consolidated financial statements.
-4(b)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 48,106 $ 60,110 $ 73,047 $ 144,900
Lease income 3,015 34,134 7,065 34,134
Repair and maintenance
fee income 43,148 48,897 87,685 94,940
94,269 143,141 167,797 273,974
COST AND EXPENSES:
Cost of sales (excluding
depreciation and
amortization) 53,766 52,664 103,065 106,849
Depreciation & amortization 461 611 920 1,525
Selling, general and
administrative expense 63,102 78,292 129,153 149,830
TOTAL OPERATING EXPENSES 117,329 131,567 233,138 258,204
INCOME (LOSS) FROM OPERATIONS (23,060) 11,574 (65,341) 15,770
OTHER INCOME (EXPENSE)
Interest and
dividend income 11,985 10,182 24,384 19,325
Realized and unrealized
gain (loss) on
marketable securities 9,834 72,922 (5,233) 148,626
Other 13 50 27 50
NET INCOME (LOSS) $ 1,228 $ 94,728 $ (46,163) $ 183,771
WEIGHTED AVERAGE NUMBER
OF COMMON SHARES
OUTSTANDING 5,126,900 5,126,900 5,126,900 5,126,900
NET INCOME (LOSS)
PER COMMON SHARE $ -- $ .02 $ (.01) $ .04
</TABLE>
*Reclassified for comparative purposes
See accompanying notes to consolidated financial statements
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Deficiency)
FROM DECEMBER 31, 1993 THROUGH June 30, 1997
<TABLE>
<CAPTION>
Common Stock
$.0001 Par Value
Authorized Addt'l Retained
10,000,000 Shares Paid-In Earnings Treasury
Shares Amount Capital (Deficit) Stock Total
<S> <C> <C> <C> <C> <C> <C>
Balance - 12/31/93 5,201,900 $ 528 $ 2,095,391 $(1,150,961) $( 7,900) $ 937,058
Net Income for period -- -- -- 61,412 -- 61,412
Purchase of Treasury
Shares (75,000) -- -- -- (18,750) ( 18,750)
Balance - 12/31/94 5,126,900 528 2,095,391 (1,089,549) (26,650) 979,720
Net Loss for period -- -- -- ( 22,717) -- ( 22,717)
Balance - 12/31/95 5,126,900 528 2,095,391 (1,112,266) (26,650) 957,003
Net Income for period -- -- -- 113,003 -- 113,003
Balance - 12/31/96 5,126,900 528 2,095,391 ( 999,263) (26,650) 1,070,006
Net Loss for period -- -- -- ( 46,163) -- ( 46,163)
Balance - 06/30/97 5,126,900* $ 528 $2,095,391 ( 1,045,426) $ (26,650) $ 1,023,843
* Shown on the accompanying Balance Sheet as follows: Issued: 5,276,900
Treasury Shares: ( 150,000)
5,126,900
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30,
1997 1996
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Profit <Loss> $ (46,163) $ 183,771
Adjustments to reconcile net income
<loss> to net cash (used in)
provided by operating activities:
Depreciation and amortization 920 1,525
(Gain) Loss on sale of marketable
securities ( 37,341) ( 126,757)
Allowance for market decline
of securities 42,574 ( 21,869)
Purchase of marketable trading
securities ( 118,563) ( 414,719)
Proceeds from sale of marketable
trading securities 113,107 480,357
Changes in operating assets
and liabilities:
(Increase) decrease in trade
accounts receivable 10,393
13,521
(Increase) decrease in inventory ( 4,028) ( 10,843)
(Increase) decrease in accounts
receivable - Other ( 2,062) ( 3,943)
(Increase) decrease in other assets ( 4,394) ( 4,209)
Increase (decrease) in accounts
payable and accrued expenses ( 6,136) ( 14,134)
Increase (decrease) in deferred
revenue ( 57,448) 16,471
Total adjustments ( 62,978) ( 84,600)
Net cash provided by (used in)
operating activities ( 109,141) 99,171
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment -- ( 868)
Net cash (used in) provided by
investing activities -- ( 868)
</TABLE>
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Contd..
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30,
1997 1996
(Unaudited) (Unaudited)
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $( 109,141) $ 98,303
CASH AND CASH EQUIVALENTS -
Beginning of period 336,678 261,385
CASH AND CASH EQUIVALENTS -
End of period $ 227,537 $ 359,688
</TABLE>
See Accompanying Notes to Consolidated Financial Statements.
-7(b)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
June 30, 1997
(Unaudited)
NOTE 1 - FAIR PRESENTATION
The balance sheet as of June 30, 1997, the statement of operations for the
three months and six months ended June 30, 1997 and 1996, the statement of
shareholders' equity as of June 30, 1997 and the statement of cash flows for
the three months ended June 30, 1997 and 1996, have been prepared by the
Company without audit. In the opinion of management, all adjustments (which
include only normal recurring accruals) necessary to present fairly the
financial position and results of operations at June 30, 1997 and for all
periods presented have been made.
The condensed financial statements as of December 31, 1996, 1995 and 1994 have
been derived from audited financial statements.
The operations for the six months ended June 30, 1997, are not necessarily
indicative of the results of operations to be expected for the Company's
fiscal year.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
condensed financial statements be read in conjunction with the consolidated
financial statements and notes thereto as of December 31, 1996, and for the year
then ended.
NOTE 2 - BASIS OF PRESENTATION
The accompanying financial statements include accounts of the Company and its
wholly-owned subsidiary, Corrections Systems International, Inc. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
NOTE 3 - EARNINGS (LOSS) PER SHARE
For the six month periods ended June 30, 1997 and 1996, per share information
was computed using the weighted average number of common shares outstanding
during the periods.
NOTE 4 - INVESTMENT IN MARKETABLE EQUITY SECURITIES
Marketable trading securities are stated at market value at the balance sheet
date. Market values of investments in
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
June 30, 1997
(Unaudited)
marketable trading securities amounts to $657,745 at June 30, 1997, and
$660,769 at December 31, 1996. The cost of these investments is $997,783 and
$958,234 respectively. Unrealized gains and losses resulting from
fluctuations in the market price of the related trading securities are
currently reflected in the statement of operations under the caption "Realized
(unrealized) gain (loss) on marketable trading securities".
NOTE 5 - INCOME TAXES
The Company does not provide for any income taxes since it has net operating
losses to offset any provision for income taxes. The Company has fully
reserved for the benefit of the net operating loss carryforwards.
NOTE 6 - POST BALANCE SHEET EVENT
On July 28, 1997, the Company entered into a Capital Stock Purchase Agreement
pursuant to which it will acquire all of the issued and outstanding stock of
Hi-Tech Leasing, Inc. which is now a wholly owned subsidiary of Vanderbilt
Square Corp. in exchange for 2,000,000 shares of the Company's authorized but
previously unissued restricted common stock. The transaction will be treated
as a purchase, and operations of the acquired company will be included in the
operations of the Company from the date of acquisition.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
ITEM 2. - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The analysis of the Company's financial condition, liquidity, capital
resources and results of operations should be viewed in conjunction with the
accompanying financial statements, including the notes thereto.
(a) Financial Condition. At June 30, 1997, the Company had current
assets of $1,091,035 as compared to $1,199,917 at December 31, 1996, total
assets of $1,095,349 as compared to $1,205,096 at December 31, 1996, current
liabilities of $71,506 as compared to $135,090 at December 31, 1996 and a
current net worth of $1,023,843 as compared to $1,070,006 at December 31,
1996. The change in net worth was attributable to the net loss incurred for
the six months ended June 30, 1997.
(a)(1) Liquidity. During the six (6) months ended June 30, 1997, the
Company had a decrease in cash and cash equivalents of $109,141 due
principally to the net loss incurred for the period.
The Company's operating expenses have continued in this reporting period,
at what the Company believes to be a minimal level. The Company has no
present commitments that are reasonably likely to result in its liquidity
increasing or decreasing in any material way. In addition, the Registrant
knows of no trend, additional demand, event or uncertainties that will result
in, or that are reasonably likely to result in, its liquidity increasing or
decreasing in any material way. The Company continues to have no fixed
executory obligations.
(a)(2) Capital Resources. The Company has no present material
commitments for additional capital expenditures. The Company has no
outstanding credit lines or loan commitments in place and has no immediate
need for additional financial credit. There can be no assurance however, that
it will be able to secure additional financing, if needed, or that if
available, on terms acceptable to the Company.
(a)(3) Results of Operations. The Company's revenues for the six (6)
months ending June 30, 1997 were $167,797 as compared to $273,974 for the six
(6) month period ended June 30, 1996. The reduction in revenues was due to a
decline in sales of new units and decreased lease income. Revenues for the
three (3) months ended June 30, 1997 were $94,269 as compared to $143,141 for
the same period in 1996. The principal reason for the decrease was a decrease
in the sale of new units and decreased lease income.
Costs and expenses for the six(6) months ended June 30, 1997, amounted to
$233,138, as compared to $258,204 for the period ended June 30, 1996. Costs
and expenses decreased in comparison to the
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CORRECTIONS SERVICES, INC. AND SUBSIDIARY
comparable six (6) month period in 1996, primarily due to decreased selling,
general and administrative expenses and decreased cost of sales. Costs and
expenses for the three (3) months ended June 30, 1997 were $117,329 as
compared to $131,567 for the same period in 1996. The principal reason for
the decrease in costs and expenses was a decrease in selling, general and
administrative expenses.
The Company realized a net loss of ($46,163) for the six (6) month period
ended June 30, 1997 as compared to a net profit of $183,771 for the six (6)
month period ended June 30, 1996. The decrease was primarily due to a
decrease in realized and unrealized gain on marketable trading securities and
a decline in the sale of new units. The Company realized a net profit of
$1,228 for the three (3) month period ended June 30, 1997 as compared to a net
profit of $94,728 for the three (3) month period ended June 30, 1996. The
decrease was primarily due to a decrease in realized and unrealized gain on
marketable securities, a decline in the sale of new units and decreased lease
income.
The Registrant knows of no trends or uncertainties, or other items, that
had, or that the Company reasonably expects will have, a materially favorable
or unfavorable impact on revenues or income from future operations, if any.
Moreover, Registrant knows of no events that will cause a material change in
the relationship between its costs and revenues.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
PART II - OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
(b)The Registrant filed no Current Reports on Form 8-K during this
reporting period. On July 28, 1997, the Registrant filed a Current Report on
Form 8-K.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CORRECTIONS SERVICES, INC.
Date: August 7, 1997 /s/Norman H. Becker
Norman H. Becker, President
Date: August 7, 1997 /s/Diane Martini
Diane Martini, Secretary/Treasurer
Date: August ___, 1997
Frank R. Bauer, Vice President
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statements of Cash Flows and Notes thereto
incorporated in Part I, Item 1. of this Form 10-Q and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1997
<CASH> 227,537
<SECURITIES> 657,745
<RECEIVABLES> 67,827
<ALLOWANCES> 2,500
<INVENTORY> 131,283
<CURRENT-ASSETS> 1,091,035
<PP&E> 138,383
<DEPRECIATION> 136,362
<TOTAL-ASSETS> 1,095,349
<CURRENT-LIABILITIES> 71,506
<BONDS> 0
0
0
<COMMON> 528
<OTHER-SE> 1,023,315
<TOTAL-LIABILITY-AND-EQUITY> 1,095,349
<SALES> 73,047
<TOTAL-REVENUES> 167,797
<CGS> 103,065
<TOTAL-COSTS> 233,138
<OTHER-EXPENSES> 5,233
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (46,163)
<INCOME-TAX> 0
<INCOME-CONTINUING> (46,163)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (46,163)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
