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 March 31, 2000
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.
10,000,000 SHARES OF COMMON STOCK, OF $.0001 PAR VALUE, WERE ISSUED AND
OUTSTANDING AT MAY 2, 2000.
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 2000 (Unaudited)
and December 31, 1999 (Audited).
Consolidated Statement of Operations - Three months ended
March 31, 2000 and 1999 (Unaudited).
Consolidated Statement of Shareholders' Equity - December
31, 1996 through March 31, 2000.
Consolidated Statement of Cash Flows - Three months ended
March 31, 2000 and 1999 (Unaudited).
Notes to Consolidated Financial Statements.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Item 4. Submission of Matters to a Vote of Securityholders
Item 5. Other Information
PART II. 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
-3-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
ASSETS
March 31, December 31,
2000 1999*
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 75,382 $ 22,059
Accounts receivable - affiliate 12,500 12,500
Accounts receivable - Other 2,879 -
Investment in marketable securities 537,672 523,479
Dividends receivable 8,474 8,475
Notes receivable - Affiliate 95,000 95,000
Other 2,357 3,089
--------- ----------
TOTAL CURRENT ASSETS 734,264 664,602
OTHER 1,601 1,671
--------- ----------
TOTAL ASSETS $ 735,865 $ 666,273
========= ==========
</TABLE>
*Reclassified for comparative purposes.
See accompanying notes to consolidated financial statements.
-4(a)-
<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(Continued)
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, December 31,
2000 1999
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued
expenses $ 957 $ 1,390
----------- -----------
TOTAL CURRENT LIABILITIES 957 1,390
----------- -----------
SHAREHOLDERS' EQUITY
Common stock $.0001 par value;
10,000,000 shares authorized;
7,586,825 shares issued in 2000
and 1999; 6,276,900 shares
outstanding at March 31, 2000
and December 31, 1999 759 759
Additional paid-in capital 2,900,667 2,900,667
Accumulated deficit (1,576,791) (1,646,816)
----------- -----------
1,324,635 1,254,610
----------- -----------
Less treasury stock, 1,309,925
shares at March 31, 2000 and
December 31, 1999 (589,727) (589,727)
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 734,908 664,883
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 735,865 $ 666,273
=========== ===========
</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
March 31,
2000 1999
---------- ----------
<S> <C> <C>
REVENUES:
Dividends and interest $ 14,016 $ 13,176
Realized and unrealized gain
(loss) on marketable securities 84,832 (26,865)
---------- ----------
98,848 (13,689)
COST AND EXPENSES:
General and administrative 28,823 113,441
---------- ----------
NET INCOME (LOSS) $ 70,025 $ (127,130)
========== ==========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING 6,276,900 7,490,404
========== ==========
NET INCOME (LOSS) PER COMMON SHARE $ .01 $ (.02)
========== ==========
</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, 1996 THROUGH MARCH 31, 2000
<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, 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 - - - (357,432) - (357,432)
--------- ------ ----------- ----------- -------- ----------
Balance - December 31, 1999 6,276,900 759 2,900,667 (1,646,816) (589,727) 664,883
Net Income for period - - - 70,025 - 70,025
--------- ------ ----------- ----------- -------- ----------
Balance - March 31, 2000 6,276,900* $ 759 $ 2,900,667 $(1,576,791) $(589,727) $ 734,908
========= ====== =========== =========== ========= ==========
</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
<TABLE>
<CAPTION>
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
Three Months Ended
March 31, March 31,
2000 1999
(Unaudited) (Unaudited)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 70,025 $ (127,130)
---------- ----------
Adjustments to reconcile net income
(loss) to net cash (used in)
provided by operating activities:
Depreciation - 51
(Gain) loss on sale of marketable
securities 18,958 32,791
Allowance for market decline
of securities (103,790) (5,926)
Issuance of common stock - 79,031
Changes in operating assets
and liabilities (net of business sold):
(Increase) decrease in accounts
receivable - other (549) 19,074
(Increase) decrease in other assets 802 2,382
Increase (decrease) in accounts
payable and accrued expenses (433) 2,536
Purchase of marketable
securities (12,840) (88,236)
Proceeds from sale of marketable
securities 81,150 214,766
---------- ----------
Total adjustments (16,702) 256,469
---------- ----------
Net cash provided by (used in)
operating activities 53,323 129,339
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investments - other - (150,000)
---------- ----------
Net cash provided by (used in)
investing activities - (150,000)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 53,323 (20,661)
CASH AND CASH EQUIVALENTS -
Beginning of period 22,059 73,593
---------- ----------
CASH AND CASH EQUIVALENTS -
End of period $ 75,382 $ 52,932
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENT
March 31, 2000
(Unaudited)
NOTE 1 - FAIR PRESENTATION
-----------------
The balance sheet as of March 31, 2000, the statement of
operations for the three months ended March 31, 2000 and
1999, the statement of shareholders' equity as of March
31, 2000 and the statement of cash flows for the three
months ended March 31, 2000 and 1999, 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 March 31,
2000 and for all periods presented have been made.
The condensed financial statements as of December 31,
1999, 1998 and 1997 have been derived from audited
financial statements.
The operations for the three months ended March 31, 2000,
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, 1999, 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 three month periods ended March 31, 2000 and
1999, 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
March 31, 2000
(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.
At December 31, 1999, the collection of the note and
accrued interest thereon was deemed to be in doubt.
Accordingly, the amount was fully reserved. During the
quarter ended March 31, 2000, the amount was written off
against the allowance for doubtful account with no profit
or loss effect.
NOTE 7 - POST-BALANCE SHEET EVENT
------------------------
At year end 1999, the Company's Board of Directors
authorized the issuance of 2,413,167 shares of previously
unissued restricted common stock, and 1,309,925 shares of
its restricted treasury stock in exchange for cash in the
amount of $68,192 and notes totaling $43,500, or $.03 per
share, to longstanding affiliates. The shares were
issued on April 3, 2000, fully paid and non-assessable.
The notes bear interest at the rate of eight percent (8%)
per annum. The result of this transaction is an increase
in shareholders equity of $111,692 with a corresponding
increase in current assets. Total shares of the
Company's common stock issued and outstanding after
giving effect to the above transaction will be 10,000,000
shares.
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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 March 31, 2000, the Company had
current assets of $734,264 as compared to $664,602 at December 31,
1999, total assets of $735,865 as compared to $666,273 at December
31, 1999, and shareholders' equity of $734,908 as compared to
$664,883 as of December 31, 1999. The increase in current assets
and total assets was primarily the result of the Company's increase
in cash and marketable securities. The increase in shareholders'
equity was primarily the result of the Company's net income for the
period.
Liquidity. The Company had a net increase in cash and cash
equivalents for the three months ended March 31, 2000 of $53,323,
and cash and cash equivalents at March 31, 2000 of $75,382, as
compared to a decrease in cash and cash equivalents of $20,661 and
cash and cash equivalents of $52,932 for the three months ended
March 31, 2000.
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 ended March 31, 2000, were derived from investment
activities.
The Company's revenues increased $112,537 to $98,848 for the
three months ended March 31, 2000, as compared to ($13,689) for the
same period of 1999. The principal reason for increased revenue
was an increase in realized and unrealized gain on marketable
securities.
Costs and expenses decreased $84,618 to $28,823 for the three
months ended March 31, 2000, as compared to $113,441 for the same
period last year principally due to a decrease in general and
administrative expenses. The Company realized net income of
$70,025 for the three months ended March 31, 2000, as compared to
a net loss of $127,130 for the same period last year. The increase
in net income was primarily due to a decrease in operating
expenses, and an increase in realized and unrealized 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 three months ended March 31, 2000.
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<PAGE>
CORRECTIONS SERVICES, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 4. - SUBMISSION OF MATTERS TO A VOTE OF SECURITYHOLDERS
On April 27, 2000, the Registrant's Board of Directors voted
to recommend amending the Company's Articles of Incorporation to
increase its authorized Common Stock from 10,000,000 shares to
25,000,000 shares to facilitate further merger or acquisition
opportunities, if any. On May 2, 2000, by written action without
a special meeting, shareholders representing more than sixty
percent (60%) of the shares eligible consented to increasing the
Registrant's authorized capital stock from 10,000,000 to 25,000,000
shares. The Company will accordingly, amend its Articles shortly.
ITEM 5. OTHER INFORMATION
Cancellation of Letter of Intent
On March 3, 2000, the Registrant entered into a Letter of
Intent to acquire all of the assets and operations of Truck Farm,
Inc., a closely-held South Carolina corporation with principal
offices in Georgetown, South Carolina. Pursuant to the terms of
the Letter of Intent, during the course of mutual due diligence by
the Registrant and by Truck Farm, Inc., Corrections Services, Inc.
was to determine whether to acquire either all of the issued and
outstanding capital stock of Truck Farm, Inc. or all of its assets
in a transaction in which the business operations of Truck Farm,
Inc. would have become the business operations of the Registrant
upon completion of the acquisition transaction.
The intended acquisition transaction contemplated an exchange
of Truck Farm common stock or assets in exchange for restricted
Common Stock of Corrections Services, Inc. upon terms and
conditions to be determined after the completion of both companies'
due diligence, a process which was anticipated to take
approximately ninety days.
The Registrant was informed on or about April 24, 2000 however
that Truck Farm, Inc. had chosen to withdraw from the intent to
effect some form of business combination with the Registrant.
The Registrant was at that point engaged in its due diligence.
The Company expected to enter into a definitive agreement of merger
or purchase upon completion of those efforts. There was no
assurance that one or more insurmountable obstacles to the
companies' intentions in the contemplated transaction would not
have arisen and precluding the Company from entering into a
definitive agreement or from implementing the terms of the
definitive agreement. Withdrawal by the target company however was
-11-
<PAGE>
not anticipated by the Registrant. The Company intends to resume
its search for a suitable acquisition, merger or other form of
business combination.
Issuance of Additional Common Stock
At year end 1999, the Company's Board of Directors authorized the
issuance of 2,413,167 shares of previously unissued restricted
common stock, and 1,309,925 shares of its restricted treasury stock
in exchange for cash in the amount of $68,192 and notes totaling
$43,500, or $.03 per share, to longstanding affiliates. The shares
were issued on April 3, 2000, fully paid and non-assessable. The
notes bear interest at the rate of eight percent (8%) per annum.
The result of this transaction is an increase in shareholders
equity of $111,692 with a corresponding increase in current assets.
Total shares of the Company's common stock issued and outstanding
after giving effect to the above transaction will be 10,000,000
shares.
ITEM 6. - EXHIBITS AND REPORTS ON FORM 8-K
On March 3, 2000, the Registrant filed a Current Report on
Form 8-K dated February 15, 2000, and reporting the Registrant's
change of certifying auditors.
On March 9, 2000, the Registrant filed a Current Report on
Form 8-K dated March 3, 2000, reporting that the Registrant had
entered into a Letter of Intent to acquire all of the assets and
operations of Truck Farm, Inc., a closely-held South Carolina
corporation. See December 31, 1999, Form 10-K, Part I., Item 1.
Business, Truck Farm, Inc.
On April 26, 2000, the Respondent filed a Current Report on
Form 8-K dated April 24, 2000, reporting the withdrawal of Truck
Farm, Inc. from the March 3, 2000 acquisition Letter of Intent.
-12-
<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: May 8, 2000 /s/Norman H. Becker
Norman H. Becker, President
Date: May 8, 2000 /s/Diane Martini
Diane Martini, Secretary/Treasurer
Date: May ___, 2000 ----------------------------------
Frank R. Bauer, Vice President
-13-
<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> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 75,382
<SECURITIES> 537,672
<RECEIVABLES> 118,853
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 734,264
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 735,865
<CURRENT-LIABILITIES> 957
<BONDS> 0
0
0
<COMMON> 759
<OTHER-SE> 1,323,876
<TOTAL-LIABILITY-AND-EQUITY> 735,865
<SALES> 0
<TOTAL-REVENUES> 98,848
<CGS> 0
<TOTAL-COSTS> 28,823
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 70,025
<INCOME-TAX> 0
<INCOME-CONTINUING> 70,025
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 70,025
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
