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, 1998
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, Ft. Lauderdale, FL. 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.
7,276,900 SHARES OF COMMON STOCK, OF $.0001 PAR VALUE, WERE ISSUED AT AUGUST
5, 1998, INCLUDING 25,000 SHARES HELD BY THE ISSUER IN TREASURY. 7,251,900
SHARES WERE OUTSTANDING AT AUGUST 5, 1998.
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1998 (Unaudited)
and December 31, 1997 (Audited).
Consolidated Statement of Operations - Three months and
six months ended June 30, 1998 and 1997 (Unaudited).
Consolidated Statement of Shareholders' Equity - December
31, 1994 through June 30, 1998.
Consolidated Statement of Cash Flows - Six months ended
June 30, 1998 and 1997 (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 SUBSIDIARIES
PART I - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
June 30, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 341,896 $ 464,577
Investment in marketable
trading securities - at market 989,968 974,660
Accounts receivable - trade - net
of allowance for uncollectable
accounts of $2,500 in 1998 and 1997 20,353 43,102
Accounts receivable - other 14,867 14,989
Notes receivable - Current:
Affiliate 11,272 4,818
Other 35,169 37,657
Net investment in direct financing
leases - Current 3,917 3,765
Accrued interest receivable 3,768 4,560
Inventory 128,552 131,911
Other 8,949 4,902
TOTAL CURRENT ASSETS 1,558,711 1,684,941
PROPERTY AND EQUIPMENT - net of
accumulated depreciation of $138,635
in 1998 and $141,201 in 1997 5,641 1,102
NOTES RECEIVABLE - Non-Current:
Affiliate 21,368 10,379
Other 72,398 55,259
NET INVESTMENT IN DIRECT FINANCING
LEASES - Non-Current 2,791 4,788
OTHER 2,164 2,169
TOTAL ASSETS $1,663,073 $1,758,638
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 31,
1998 1997
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued
expenses - principally trade $ 7,006 $ 49,283
Deferred revenue 42,541 43,015
TOTAL CURRENT LIABILITIES 49,547 92,298
DEFERRED REVENUE - non-current 4,467 -
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock $.0001 par value;
10,000,000 shares authorized;
7,276,900 shares issued in 1998
and 1997. 7,251,900 shares
outstanding at June 30, 1998 and
7,216,900 shares outstanding
at December 31, 1997 728 728
Additional paid-in capital 2,821,667 2,821,667
Accumulated deficit (1,207,231) (1,137,022)
1,615,164 1,685,373
Less treasury stock, 25,000
shares at June 30, 1998 and
60,000 shares at December 31,
1997, at cost (6,105) (19,033)
TOTAL SHAREHOLDERS' EQUITY 1,609,059 1,666,340
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 1,663,073 $ 1,758,638
</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,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 16,293 $ 48,106 $ 34,282 $ 73,047
Lease income 3,413 3,015 3,938 7,065
Repair and maintenance fee income 49,974 43,148 95,851 87,685
69,680 94,269 134,071 167,797
COST AND EXPENSES:
Operating expenses (excluding
depreciation and amortization) 35,612 53,766 70,331 103,065
Depreciation and amortization 731 461 1,027 920
Selling, general and
administrative expense 75,666 63,102 151,205 129,153
TOTAL COSTS AND EXPENSES 112,009 117,329 222,563 233,138
(LOSS) FROM OPERATIONS (42,329) (23,060) (88,492) (65,341)
OTHER INCOME (EXPENSE)
Interest and dividend income 25,924 11,985 50,966 24,384
Realized and unrealized gain (loss)
on marketable securities (43,616) 9,834 (33,038) (5,233)
Other 164 13 355 27
NET INCOME (LOSS) $ (59,857) $ (1,228) $ (70,209) $ (46,163)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,227,614 5,126,900 7,216,569 5,126,900
NET INCOME (LOSS) PER COMMON SHARE $ (.01) $ - $ (.01) $ (.01)
</TABLE>
* Reclassified from comparative purposes
See accompanying notes to consolidated financial statements
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Deficiency)
FROM DECEMBER 31, 1994 THROUGH June 30, 1998
<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, 1994 5,126,900 $ 528 $ 2,095,391 $(1,089,549) $(26,650) $ 979,720
Net loss for 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 period - - - 113,003 - 113,003
Balance - December 31, 1996 5,126,900 528 2,095,391 (999,263) (26,650) 1,070,006
Purchase of treasury stock (522,500) - - - (94,985) (94,985)
Sale of treasury stock 462,500 - - - 75,952 75,952
Acquisition of Hi-Tech
Leasing, Inc. 2,000,000 200 736,788 - - 736,988
Acquisition of Professional
Programmers, Inc. 150,000 - (10,512) - 26,650 16,138
Net Loss for period - - - (137,759) - (137,759)
Balance - December 31, 1997 7,216,900 728 2,821,667 (1,137,022) (19,033) 1,666,340
Purchase of treasury stock (25,000) - - - (7,225) (7,225)
Sale of treasury stock 60,000 - - - 20,153 20,153
Net Loss for period - - - (70,209) - (70,209)
Balance - June 30, 1998 7,251,900* $ 728 $2,821,667 $(1,207,231) $ (6,105) $1,609,059
</TABLE>
* Shown on the accompanying
Balance Sheet as follows: Issued: 7,276,900
Treasury Shares: 25,000
7,251,900
See accompanying notes to consolidated financial statements.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
<TABLE>
<CAPTION>
Six Months Ended
June 30, June 30,
1998 1997
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (70,209) $ (46,163)
Adjustments to reconcile net income
(loss) to net cash (used in)
provided by operating activities:
Depreciation and amortization 1,027 920
(Gain) loss on sale of marketable
securities (15,239) (37,341)
Allowance for market decline
of securities 48,277 42,574
Changes in operating assets
and liabilities:
(Increase) decrease in trade
accounts receivable 22,749 10,393
(Increase) decrease in inventory 158 (4,028)
(Increase) decrease in accounts
receivable - other 121 (2,062)
(Increase) decrease in accrued
interest receivable 792 -
(Increase) decrease in other assets (4,042) (4,394)
Increase (decrease) in accounts
payable and accrued expenses (42,277) (6,136)
Increase (decrease) in deferred
revenue 3,993 (57,448)
Purchase of marketable trading
securities (226,903) (118,563)
Proceeds from sale of marketable
trading securities 191,485 113,107
Total adjustments (19,859) (62,978)
Net cash provided by (used in)
operating activities (90,068) (109,141)
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances paid on notes receivable
- affiliate (20,900) -
Advances paid on notes receivable - other (60,000) -
Principal collections of notes
receivable - affiliate 3,457 -
Principal collections of notes
receivable - other 45,350 -
Principal collections of direct financing
leases 1,845 -
Purchase of property and equipment (2,365) -
Net cash (used in) provided by
investing activities (32,613) -
</TABLE>
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Six Months Ended
June 30, June 30,
1998 1997
(Unaudited) (Unaudited)
<S> <C> <C>
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (122,681) (109,141)
CASH AND CASH EQUIVALENTS -
Beginning of period 464,577 336,678
CASH AND CASH EQUIVALENTS -
End of period $ 341,896 $ 227,537
</TABLE>
See accompanying notes to consolidated financial statements.
-7(b)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
June 30, 1998
(Unaudited)
NOTE 1 - FAIR PRESENTATION
The balance sheet as of June 30, 1998, the statement of
operations for the three months and six month ended June 30,
1998 and 1997, the statement of shareholders' equity as of
June 30, 1998 and the statement of cash flows for the six
months ended June 30, 1998 and 1997, 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, 1998 and for all periods
presented have been made.
The condensed financial statements as of December 31, 1997,
1996 and 1995 have been derived from audited financial
statements.
The operations for the six months ended June 30, 1998, 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,
1997, and for the year then ended.
NOTE 2 - BASIS OF PRESENTATION
The accompanying financial statements include accounts of
the Company and its wholly-owned subsidiaries, Corrections
Systems International, Inc., Hi-Tech Leasing, Inc. and
Professional Programmers, 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, 1998 and 1997, per
share information was computed using the weighted average
number of common shares outstanding during the periods.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
June 30, 1998
(Unaudited)
NOTE 4 - INVESTMENT IN MARKETABLE EQUITY SECURITIES
Marketable trading securities are stated at market value at
the balance sheet date. Market values of investments in
marketable trading securities amounts to $989,968 at June
30, 1998, and $974,660 at December 31, 1997. The cost of
these investments is $1,357,727 and $1,294,142 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 - DIRECT FINANCING LEASES
The net investment in direct financing leases consists of
the gross amount of the lease, net of deferred interest and
allowance for doubtful accounts.
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<PAGE>
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.
Financial Condition. At June 30, 1998, the Company had
current assets of $1,558,711 as compared to $1,684,941 at December
31, 1997, total assets of $1,663,073 as compared to $1,758,638 at
December 31, 1997, and shareholders' equity of $1,609,059 as
compared to $1,666,340 as of December 31, 1997. The decrease in
current assets and total assets was primarily the result of the
Company's decrease in cash and accounts receivable. Shareholders'
equity from June 30, 1998 decreased $57,281 to $1,609,059 from
$1,666,340 at December 31, 1997, primarily as a result of the
Company's increased loss for the period.
Liquidity. The Company had a net decrease in cash and cash
equivalents for the six months ended June 30, 1998 of $122,681, and
cash and cash equivalents at June 30, 1998 of $341,896, as compared
to a decrease in cash and cash equivalents of $109,141 and cash and
cash equivalents of $227,537, for the six months ended June 30,
1997.
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 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 credit
borrowing, if needed.
Results of Operations. The Company's revenues for the period
ended June 30, 1998, were derived from sales, lease income and
repairs and maintenance income.
The Company's revenues decreased $33,726, or 20% to $134,071
for the six months ended June 30, 1998, as compared to $167,797 for
the same period of 1997. The principal reason for decreased
revenue was a decline in the sale of new monitoring units. The
Company's revenues decreased $24,589, or 26% to $69,680 for the
three months ended June 30, 1998, as compared to $94,269 for the
same period of 1997 for the same reason.
Costs and expenses decreased $10,575, or 4.5% to $222,563 for
the six months ended June 30, 1998, as compared to $233,138 for the
same period last year, principally due to a decrease in cost of
sales. The Company realized a net loss of $70,209 for the six
months ended June 30, 1998, as compared to a net loss of $46,163
for the same period last year. The increased net loss was
primarily due to a decrease in the sale of new units.
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<PAGE>
Costs and expenses decreased $5,320 or 4.5% to $112,009 for
the three months ended June 30, 1998, as compared to $117,329 for
the same period last year, due principally to a decrease in
operating expenses. The Company realized a net loss of $59,857 for
the three months ended June 30, 1998, as compared to a net loss of
$1,228 for the same period last year. The increased net loss was
primarily due to a decrease in the sale of new units, a reduction
in interest and dividend income and an increase in realized and
unrealized loss on marketable securities.
The Company knows of no unusual or infrequent events or
transactions, nor significant economic changes that have materially
affected its revenues from continuing operations.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the period.
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<PAGE>
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 10, 1998 /s/Norman H. Becker
Norman H. Becker, President
Date: August 10, 1998 /s/Diane Martini
Diane Martini, Secretary/Treasurer
Date: August ____, 1998
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-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 341,896
<SECURITIES> 989,968
<RECEIVABLES> 91,346
<ALLOWANCES> 2,500
<INVENTORY> 128,552
<CURRENT-ASSETS> 1,558,711
<PP&E> 144,276
<DEPRECIATION> 138,635
<TOTAL-ASSETS> 1,663,073
<CURRENT-LIABILITIES> 49,547
<BONDS> 0
0
0
<COMMON> 728
<OTHER-SE> 1,608,331
<TOTAL-LIABILITY-AND-EQUITY> 1,663,073
<SALES> 34,282
<TOTAL-REVENUES> 134,071
<CGS> 70,331
<TOTAL-COSTS> 222,563
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (70,209)
<INCOME-TAX> 0
<INCOME-CONTINUING> (70,209)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (70,209)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
