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, 1999
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.
7,586,825 SHARES OF COMMON STOCK, OF $.0001 PAR VALUE, WERE ISSUED AT JULY 31,
1999, INCLUDING 1,309,925 SHARES HELD BY THE ISSUER IN TREASURY. 6,276,900
SHARES WERE OUTSTANDING AT JULY 31, 1999.
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - June 30, 1999 (Unaudited)
and December 31, 1998 (Audited).
Consolidated Statement of Operations - Three months and
six months ended June 30, 1999 and 1998 (Unaudited).
Consolidated Statement of Shareholders' Equity - December
31, 1995 through June 30, 1999.
Consolidated Statement of Cash Flows - Six months ended
June 30, 1999 and 1998 (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,
1999 1998*
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 149,441 $ 73,593
Investment in marketable securities 526,418 771,283
Dividends receivable 7,352 28,223
Notes receivable - Affiliate 77,000 65,000
Notes receivable - Other 150,000 -
Other 4,121 5,347
TOTAL CURRENT ASSETS 914,332 943,446
PROPERTY AND EQUIPMENT 101 202
OTHER 1,671 1,671
TOTAL ASSETS $ 916,104 $ 945,319
</TABLE>
*Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
June 30, December 31,
1999 1998
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued
expenses $ 2,937 $ 2,035
TOTAL CURRENT LIABILITIES 2,937 2,035
SHAREHOLDERS' EQUITY
Common stock $.0001 par value;
10,000,000 shares authorized;
7,586,825 shares issued in 1999;
7,276,000 shares issued in 1998;
6,276,900 shares outstanding
at June 30, 1999 and 5,966,975
Shares outstanding at
at December 31, 1998 759 728
Additional paid-in capital 2,900,667 2,821,667
Accumulated deficit (1,398,532) (1,289,384)
1,502,894 1,533,011
Less treasury stock, 1,309,925
shares at June 30, 1999 and
December 31, 1998 (589,727) (589,727)
TOTAL SHAREHOLDERS' EQUITY 913,167 943,284
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 916,104 $ 945,319
</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,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
REVENUES:
Dividends and interest $ 12,847 $ 14,488 $ 26,023 $ 29,911
Realized and unrealized gain
(loss) on marketable securities 30,633 (27,019) 3,768 (22,563)
43,480 (12,531) 29,791 7,348
COST AND EXPENSES:
General and administrative 25,498 73,324 138,939 129,689
INCOME (LOSS) FROM CONTINUING OPERATIONS 17,982 (85,855) (109,148) (122,341)
INCOME FROM DISCONTINUED OPERATIONS - 25,998 - 52,132
NET INCOME (LOSS) $ 17,982 $ (59,857) $ (109,148) $ (70,209)
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 7,586,825 7,227,614 7,538,881 7,216,569
BASIC INCOME (LOSS) PER COMMON SHARE
Continued operations $ - $ (.01) $ (.01) $ (.02)
Discontinued operations - - - .01
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 SUBSIDIARY
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FROM DECEMBER 31, 1995 THROUGH JUNE 30, 1999
<TABLE>
<CAPTION>
Common Stock
$.0001 Par Value Additional
Authorized 10,000,000 Shares Paid-In Accumulated Treasury
Shares Amount Capital (Deficit) Stock Total
<S> <C> <C> <C> <C> <C> <C>
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 shares (522,500) - - - (94,985) (94,985)
Sale of treasury shares 462,500 - - - 75,952 75,952
Acquisition of:
Hi-Tech Leasing, Inc. 2,000,000 200 736,788 - - 736,988
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
Proceeds from disposition
of subsidiary (1,309,925) - - - (589,727) (589,727)
Sale of treasury shares 60,000 - - - 19,033 19,033
Net Loss for period - - - (152,362) - (152,362)
Balance - December 31, 1998 5,966,975 728 2,821,667 (1,289,384) (589,727) 943,284
Issuance of 309,925 shares 309,925 31 79,000 - - 79,031
Net Loss for period - - - (109,148) - (109,148)
Balance - June 30, 1999 6,276,900* $ 759 $ 2,900,667 $(1,398,532) $ (589,727) $ 913,167
</TABLE>
* Shown on the accompanying
Balance Sheet as follows: Issued: 7,586,825
Treasury Shares: (1,309,925)
6,276,900
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,
1999 1998
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (109,148) $ (70,209)
Adjustments to reconcile net income
(loss) to net cash (used in)
provided by operating activities:
Depreciation 101 1,027
(Gain) loss on sale of marketable
securities 25,270 (15,239)
Allowance for market decline
of securities (29,038) 48,277
Issuance of common stock 79,031 -
Changes in operating assets
and liabilities (net of business sold):
(Increase) decrease in trade
accounts receivable - 22,749
(Increase) decrease in inventories - 158
(Increase) decrease in accounts
receivable - other 20,871 121
(Increase) decrease in accrued
interest receivable - 792
(Increase) decrease in other assets 1,226 (4,042)
Increase (decrease) in accounts
payable and accrued expenses 902 (42,277)
Increase (decrease) in deferred
revenue - 3,993
Purchase of marketable
securities (136,280) (226,903)
Proceeds from sale of marketable
securities 384,913 191,485
Total adjustments 346,966 (19,859)
Net cash provided by (used in)
operating activities 237,848 (90,068)
</TABLE>
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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,
1999 1998
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances on notes receivable - affiliate $ (12,000) $ (20,900)
Advances on notes receivable - other (150,000) (60,000)
Principal collections of notes
receivable - affiliate - 3,457
Principal collections of notes
receivable - other - 45,350
Principal collection of direct
financing leases - 1,845
Purchase of property and equipment - (2,365)
Net cash (used in)
investing activities (162,000) (32,613)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 75,848 (122,681)
CASH AND CASH EQUIVALENTS -
Beginning of period 73,593 464,577
CASH AND CASH EQUIVALENTS -
End of period $ 149,441 $ 341,896
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
June 30, 1999
(Unaudited)
NOTE 1 - FAIR PRESENTATION
The balance sheet as of June 30, 1999, the statement of
operations for the three months and six months ended June
30, 1999 and 1998, the statement of shareholders' equity
as of June 30, 1999 and the statement of cash flows for
the six months ended June 30, 1999 and 1998, 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,
1999 and for all periods presented have been made.
The condensed financial statements as of December 31,
1998, 1997 and 1996 have been derived from audited
financial statements.
The operations for the six months ended June 30, 1999,
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, 1998, 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, 1999 and 1998,
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 SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
June 30, 1999
(Unaudited)
NOTE 4 - INVESTMENT IN MARKETABLE SECURITIES
The Company's investment in marketable securities
consists of trading securities which are carried at
market value in the accompanying balance sheets.
Unrealized gains and losses resulting from fluctuations
in market price are reflected in the statement of
operations.
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 - NOTE RECEIVABLE - OTHER
On February 8, 1999, the Company acquired 15% of the
issued and outstanding capital stock of Physicians
Acceptance Corporation ("PAC"), a privately-held Florida
corporation for $150,000. On May 10, 1999, the Company
rescinded the purchase agreement and on July 1, 1999, the
Company entered into an eight percent (8%) promissory
note for $150,000. The amount is payable in full on or
before June 30, 2000, bearing interest payable monthly.
For further information, see Item 5 - Other Information
elsewhere in this Report.
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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, 1999, the Company had
current assets of $914,332 as compared to $943,446 at December 31,
1998, total assets of $916,104 as compared to $945,319 at December
31, 1998, and shareholders' equity of $913,167 as compared to
$943,284 as of December 31, 1998. The decrease in current assets
and total assets was primarily the result of the Company's decrease
in marketable securities. The decrease in shareholders' equity was
primarily the result of the Company's net loss for the period.
Liquidity. The Company had a net increase in cash and cash
equivalents for the six months ended June 30, 1999 of $75,848, and
cash and cash equivalents at June 30, 1999 of $149,441, as compared
to a decrease in cash and cash equivalents of $122,681 and cash and
cash equivalents of $341,896 for the six months ended June 30,
1999.
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.
Results of Operations. The Company's revenues for the three
months and six months ended June 30, 1999, were derived from
investment activities.
The Company's revenues increased $22,443 to $29,791 for the
six months ended June 30, 1999, as compared to $7,348 for the same
period of 1998. The principal reason for increased revenue was an
increase in the gain on marketable securities. The Company's
revenues increased $56,011 to $43,380 for the three months ended
June 30, 1999, as compared to ($12,531) for the same period of
1998.
Operating expenses increased $9,250 to $138,939 as compared to
$129,689 for the same period last year principally due to the fact
that the Company issued 309,925 shares of its common stock to
certain officers, directors, former employees and key professionals
for services rendered throughout the past years. The Company
realized a net loss of $109,148 for the six months ended June 30,
1999, as compared to a net loss of $70,209 for the same period last
year. The increase in net loss was primarily due to an increase in
operating expenses.
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<PAGE>
Costs and expenses decreased $47,826 or approximately 65% to
$25,498 for the three months ended June 30, 1999, as compared to
$73,324 for the same period last year, principally due to a
decrease in general and administrative expenses. The Company
realized a net profit of $17,982 for the three months ended June
30, 1999, as compared to a net loss of $59,857 for the same period
last year. The increase in net profit was primarily due to an
increase in the gain on marketable securities.
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 six months ended June 30, 1999.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 5. - OTHER INFORMATION
On February 8, 1999, the Company acquired 15% of the issued
and outstanding capital stock of Physicians Acceptance Corporation
for cash in the amount of $150,000. At the time of the
acquisition, the Company intended to pursue acquisition of all of
the ownership interest in Physicians Acceptance Corporation
following due inquiry and investigation toward that end,
particularly with respect to the details of the business and
intended business of Physicians Acceptance Corporation and its
financial history, present condition and commercial outlook.
At that time, the Company's intent to acquire Physicians
Acceptance Corporation as a wholly owned subsidiary had not been
reduced to a definitive agreement. Since the Registrant's purchase
of 15% of the issued and outstanding capital stock of Physicians
Acceptance Corporation, the Company has pursued its inquiry and
diligence into that company and has now concluded that further
pursuit of the acquisition is not advisable and the Company has
proposed recission of the 15% ownership purchase at this time.
Physicians Acceptance Corporation is agreeable and terms for its
repurchase of the 15% ownership interest from the Company were
negotiated and agreed to on May 10, 1999.
Pursuant to the recission agreement, Physicians Acceptance
Corporation repurchased the 15% of its capital stock acquired by
the Company on February 8, 1999 on or before July 1, 1999. The
repurchase price is the same $150,000 paid by the Registrant to
Physicians Acceptance Corporation on or about February 8,1999.
Pursuant to the terms of the recission agreement, the stock will be
held in escrow until the repurchase transaction is fully completed
and the Registrant has received the full repurchase price. If
Physicians Acceptance Corporation were to be unable to pay the full
purchase price on or before July 1, 1999, it was required to make
and enter into a promissory note for the amount payable on or
before June 30, 2000 and bearing interest payable monthly at the
rate of eight percent (8%) per annum. Physicians Acceptance
Corporation has made and delivered the Promissory Note as agreed
and the payment schedule is current. Upon completion of the note
payment transaction, the Company's purchase of issued and
outstanding capital stock of Physicians Acceptance Corporation
shall have been fully rescinded.
Physicians Acceptance Corporation was formed to arrange
patient financing for elective surgical and non-surgical
procedures. Physicians Acceptance Corporation perceives that an
increase in percentage of healthcare industry reimbursement is
comprised of patient payments or partial payments, especially for
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<PAGE>
elective medical procedures. They anticipate that as a percentage
of non-covered medical costs in that area grows, and as medical
costs in general continue to rise, more and more patient funding of
such expenses as opposed as insurance funding will be encountered.
Physicians Acceptance Corporation perceives that increasing need
and demand as correlated to an increasing demand for affordable
financing options from medical services providers. Upon inquiry
and investigation for the purpose of establishing parameters for a
definitive acquisition agreement, the Company came to view the
business and proposed business of Physicians Acceptance Corporation
as unsuited to the Company's view of appropriate lines of business
in which it would be well advised to engage. After extensive
discussion with Physicians Acceptance Corporation, it became
apparent that the paths envisioned by respective managements were
divergent and that the original mutual view of the Company's
acquisition of Physicians Acceptance Corporation as a wholly owned
subsidiary was not appropriate for either company.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
No reports were filed on Form 8-K for the period ending
June 30, 1999.
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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 12, 1999 /s/Norman H. Becker
Norman H. Becker, President
Date: August 12, 1999 /s/Diane Martini
Diane Martini, Secretary/Treasurer
Date: August ____, 1999
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-30-1999
<CASH> 149,441
<SECURITIES> 526,418
<RECEIVABLES> 234,352
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 914,332
<PP&E> 54,846
<DEPRECIATION> 54,745
<TOTAL-ASSETS> 916,104
<CURRENT-LIABILITIES> 2,937
<BONDS> 0
0
0
<COMMON> 759
<OTHER-SE> 912,408
<TOTAL-LIABILITY-AND-EQUITY> 916,104
<SALES> 0
<TOTAL-REVENUES> 29,791
<CGS> 0
<TOTAL-COSTS> 138,939
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (109,148)
<INCOME-TAX> 0
<INCOME-CONTINUING> (109,148)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (109,148)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
