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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, 1999
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 March 17, 2000, was approximately $1,400,000.
The number of shares of Common Stock, $.0001 par value, of the Registrant
issued as of March 17, 2000, was 7,586,825 shares. Of that total 6,276,900
shares are outstanding. The Company has 1,309,925 shares in treasury.
PART I
------
ITEM 1. BUSINESS
Background
- ----------
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 to
relieve the need for incarceration in a jail or similar facility.
The Company was commercially active in that area until mid-1998.
Since August 31, 1998 the Registrant has had no remaining
commercial operations, intending to conserve its assets while
seeking one or more opportunities for merger, acquisition or
suitable commercial enterprise.
Physicians Acceptance Corporation
- ---------------------------------
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 ("PAC")
following due inquiry and investigation toward that end,
particularly with respect to the details of the business and
intended business of PAC and its financial history, current
condition and commercial outlook.
After extensive discussion, 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.
The Company's intent to acquire PAC as a wholly owned
subsidiary had not been reduced to a definitive agreement. After
the Registrant's purchase of fifteen (15%) percent of the PAC
capital stock, the Company concluded that further pursuit of the
acquisition was not advisable. The Company proposed recission of
the stock purchase, PAC was 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 PAC capital stock acquired by the
Company on July 1, 1999. The repurchase price was the same
$150,000 paid by the Registrant to PAC on or about February 8,1999.
PAC was not able to pay the full purchase price on or before July
1, 1999, and, pursuant to the recission agreement, it entered into
2
a promissory note ("Note") for the full amount payable on or before
June 30, 2000, bearing interest payable monthly at the rate of
eight percent (8%) per annum. Upon acceptance of the note, the
Company's purchase of capital stock of Physicians Acceptance
Corporation was fully rescinded. The unpaid balance of the Note,
$150,000, plus accrued interest in the amount of $5,031 was fully
reserved at December 31, 1999.
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
elective medical procedures. 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.
Truck Farm, Inc.
- ----------------
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., the Registrant will
determine 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.
will become the business operations of the Registrant upon
completion of the acquisition transaction. It is contemplated by
both companies that the Registrant's Board of Directors will be
comprised in whole or in majority part of the Directors of Truck
Farm, Inc. and that the Registrant will change its name to reflect
its new commercial operations.
The intended acquisition transaction contemplates 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 following the completion of both
companies' due diligence, a process which is anticipated to take
approximately ninety days from the date of the Letter of Intent.
While there can be no assurance that such due diligence will not
uncover one or more insurmountable obstacles to completion of the
intended acquisition transaction, the Registrant anticipates that
it will be able to develop and enter into a definitive merger or
asset purchase agreement, as the case may be, upon completion of
3
the mutual due diligence efforts.
The Registrant is informed that Truck Farm, Inc. was
incorporated in the state of South Carolina on August 15, 1995.
Since its inception, Truck Farm, Inc. has operated and currently
operates a sales and service business catering to 4x4 and street
truck owners for engines, equipment and accessories from a brick
and mortar location in Georgetown, South Carolina and from its
Internet facilities known as TruckFarm.com. While it may not be
ultimately possible to do so, Truck Farm, Inc. anticipates multi-
state expansion and expects to add 4x4 and street truck vehicle
sales and service operations to its current sales and service of
engines, equipment and accessories.
The Registrant and Truck Farm, Inc. are presently engaged in
their respective due diligence. The Company expects to enter into
a definitive agreement of merger or purchase of assets, as the case
may be, upon completion of those efforts. There can of course be
no assurance that one or more insurmountable obstacles to the
companies' present intention in the contemplated transaction will
not arise and preclude the Company from entering into a definitive
agreement, or from implementing the terms of the definitive
agreement in the near term.
Employees
- ---------
Mr. Norman H. Becker and Mr. Frank R. Bauer, are officers of
the Company each of whom currently devotes approximately ten (10%)
percent of their time to its activities. Ms. Diane Martini, an
officer of the Company, currently devotes approximately eighty
(80%) percent of her time to its activities. The Company has no
other full-time employees See Part III., Item 10, Directors and
Executive Officers of the Registrant.
ITEM 2. PROPERTIES
The Company occupies its principal office space on a month-to-
month basis at a rental and administrative charge of $2,600 per
month ($31,200 per annum).
ITEM 3. LEGAL PROCEEDINGS
The Company is not now a party to any litigation or, to its
knowledge, threatened litigation.
4
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 1999, through
solicitation of proxies or otherwise.
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.
COMMON STOCK
------------
Period Bid Price Asked Price
- ------ --------- -----------
High Low High Low
---- --- ---- ---
First Quarter, 1998 $0.35 $0.25 $0.40 $0.30
Second Quarter, 1998 $0.40 $0.30 $0.45 $0.32
Third Quarter, 1998 $0.45 $0.35 $0.50 $0.40
Fourth Quarter, 1998 $0.375 $0.30 $0.42 $0.37
First Quarter, 1999 $0.35 $0.25 $0.40 $0.30
Second Quarter, 1999 $0.40 $0.30 $0.45 $0.32
Third Quarter, 1999 $0.48 $0.37 $0.52 $0.44
Fourth Quarter, 1999 $0.50 $0.35 $0.55 $0.45
January 1, through
March 17, 2000 $0.60 $0.50 $0.81 $0.70
(b) Holders. As of March 15, 2000, the approximate number of
recordholders of Common Stock of the Registrant was 975.
The Company is unable to determine the actual number of
beneficial holders of its Common Stock at March 17, 2000 due to
Common Stock held for stockholders "in street name", but estimates
the current total to be approximately 1150.
(c) Dividends. Registrant has paid no dividends since inception
and does not now anticipate paying cash dividends in the
foreseeable future. See Item 7.(a) Financial Condition.
5
ITEM 6. SELECTED FINANCIAL DATA
Summary of Statement of Operations:
- -----------------------------------
As of As of As of As of As of
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
-------- -------- -------- -------- --------
Revenue ($ 23,657) $ 37,838 $ 960 $ 93,404 ($ 8,205)
Oper. Exp. $ 333,775 $ 253,611 $ 314,452 $ 290,426 243,456
Net Income (Loss) ($ 357,432) ($ 152,362)($ 137,759) $ 113,003 ($ 22,717)
Weighted No. of
shs. outstanding 7,563,050 6,804,336 5,936,893 5,126,900 5,126,900
Net Income (Loss)
per sh. Common
Stk. outstanding ($ .05) ($ .02)($ .02) $ .02 ($ .004)
(See Note A-Notes
to Fin. Stmts.)
Summary Balance Sheet Information:
- ----------------------------------
As of As of As of As of As of
12/31/99 12/31/98 12/31/97 12/31/96 12/31/95
-------- -------- -------- -------- --------
Total Assets $ 666,273 $ 945,319 $1,758,638 $1,205,096 $1,087,236
Total Current $ 1,390 $ 2,035 $ 92,298 $ 135,090 $ 120,382
Liabilities
Tot. Current Assets $ 664,602 $ 943,446 $1,684,941 $1,199,917 $1,079,708
Stkholders' Equity $ 664,883 $ 943,284 $1,666,340 $1,070,006 $ 957,003
Cash Dividends $ -0- $ -0- $ -0- $ -0- $ -0-
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION
(a) Financial Condition. As of December 31, 1999 the Company
had current assets of $664,602 compared to $943,446 at December 31,
1998, total assets of $666,273 compared to $945,319 at December 31,
1998 and shareholders equity of $664,883 as compared to $943,284 at
December 31, 1998. The decrease in current assets, total assets
and shareholders' equity was primarily the result of the operating
loss incurred during the year ended December 31, 1999 resulting
from the Companies lack of commercial operations with continuing
operating expenses.
Liquidity. The Company had a net decrease in cash and cash
equivalents for the year ended December 31, 1999 of $51,534, and
cash and cash equivalents at the end of the year of $22,059 as
6
compared to a decrease in cash and cash equivalents of $390,984,
and cash and cash equivalents of $73,593 for the year ended
December 31, 1998. 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, 1999, were derived principally from
investment activities.
The Company's revenues decreased $61,495 to ($23,657) for the
fiscal year ended December 31, 1999, as compared to $37,838 for the
same period of 1998. The principal reason for decreased revenue
was an increase in the loss on marketable securities, and a
decrease in interest and dividend income.
Operating expenses increased $80,164 to $333,775 as compared
to $253,611 for the same period last year, principally due to the
issuance of common stock for services. The Company realized a net
loss of ($357,432) for the fiscal year ended December 31, 1999, as
compared to a net loss of ($152,362) for the same period last year.
The increase in net loss was primarily due to an increase in
realized and unrealized loss on marketable securities, and the
increased operating 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, 1999.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See financial statements and supplementary data attached as
Exhibit 1.
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
7
PART III
--------
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a)(b) Identification of Directors and Executive Officers
--------------------------------------------------
Name Age Offices Held
- ---- --- ------------
Norman H. Becker 62 President/Director
Frank Bauer 55 Vice President/Director
Diane Martini 52 Secretary/Treasurer/Director
Eugene M. Kennedy 62 Director
Robert B. Yeakle 59 Director
(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. 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 through September, 1996. Mr. Bauer was also
President and Chief Executive Officer of Specialty Device
Installers, Inc., a privately held Florida corporation engaged in
outside plant utility and construction contracting. In September
of 1996 Specialty Device Installers, Inc. was acquired by Guardian
International, Inc. Mr. Bauer is presently a manager at Guardian
International, Inc. Mr. Bauer holds the Bachelor of Business
Administration Degree from Stetson University in Deland, Florida.
Diane Martini has been Secretary/Treasurer and a director of
the Company since January 12, 1993. 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.
8
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. Mr. Yeakle continues as
a member of the Company's 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 publicly
held management consulting company traded on the London Stock
Exchange. Mr. Yeakle is currently Vice President, Sales Marketing,
a founder and current shareholder of RMC, Inc., a consulting
company. Mr. Yeakle attended the School of Engineering at Rutgers
University in New Brunswick, New Jersey.
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. There was no compensation
received by Executive Officers of the Company during the year ended
December 31, 1999.
9
- ------------------------------------------------------------------------------------------------------------------
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
- ------------------------------------------------------------------------------------------------------------------
Norman H. Becker 1998 $ -0- -- -- -- -- -- --
President (1) 1999 $ -0- -- -- -- -- -- --
(since 1/15/93)
Frank Bauer (1) 1998 $ -0- -- -- -- -- -- --
Vice-President 1999 $ -0- -- -- -- -- -- --
President
Diane Martini 1998 $27,000 -- -- -- -- -- --
Secretary/ 1999 $ -0- -- -- -- -- -- $ 12,750
Treasurer (2)
(since 01/12/93)
All Executive 1998 $27,000 -- -- -- -- -- --
Officers & Former 1999 $ -0- -- -- -- -- -- $ 12,750
Executive Officers
as a Group (3)
Persons (1)(2)
- ------------------------------------------------------------------------------------------------------------------
(1) Mr. Becker received a total of $23,537 in accounting fees from
the Company during 1999.
(2) Diane Martini received $12,750 in stock for services rendered
during the year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(b) Security of Ownership of Management
-----------------------------------
Name of Amount and Nature Percent
Title of Beneficial of Beneficial of
Class Owner Ownership Class(1)
- -------- ---------- ----------------- --------
Common Stock Diane Martini (2) 135,000 Shares 2.2%
Common Stock Norman H. Becker 341,725 Shares 5.4%
Common Stock Frank R. Bauer 131,500 Shares 2.1%
Common Stock Eugene M. Kennedy 81,000 Shares 1.3%
10
Contd..
Name of Amount and Nature Percent
Title of Beneficial of Beneficial of
Class Owner Ownership Class(1)
- -------- ---------- ----------------- --------
Common Stock Ronald A. Martini (2) 640,806 Shares 10.2%
Common Stock Robert B. Yeakle 300,000 Shares 4.8%
Common Stock Corp. Invest. Assoc.(2) 870,000 Shares 13.7%
Common Stock All Officers and
Directors as a Group
(5 persons) 989,225 Shares 15.8%
- ------------------------------------------------------------------------------------------------------------------
(1) Based upon 6,276,900 shares outstanding at March 20, 2000.
(2) While Ronald A. Martini disclaims beneficial ownership of the
shares of Common Stock owned by Diane Martini and Corporate
Investment Associates, they may be deemed controlled by him.
When aggregated, Mr. Martini may be deemed in control of
1,645,806 shares of the Company's Common Stock, or 26.2% of
the Class.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Transactions with Management and Others
- ---------------------------------------
The Company paid a total of $67,550 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, 1999, the Company paid its
director, Eugene M. Kennedy, $12,828 in legal fees and costs
reimbursement in connection with legal services rendered to the
Company by his law firm.
In addition, the Company paid its President and director,
Norman H. Becker accounting fees of $23,537.
11
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, 1999 and
December 31, 1998.
Consolidated Statement of Operations - Three Years Ended
December 31, 1999.
Consolidated Statement of Shareholders' Equity - Three
Years Ended December 31, 1999.
Consolidated Statement of Cash Flows - Three Years Ended
December 31, 1999.
Notes to Consolidated Financial Statements.
2. Schedules:
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.
12
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, 1999.
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.
13
Consents of experts and counsel:
Not applicable.
Power of Attorney:
Not applicable.
Additional Exhibits:
There were no current reports on Form 8-K filed by the
Registrant during the fourth quarter of 1999.
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 Part I.,
Item 1. Business, Truck Farm, Inc.
14
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 28 day
of March, 2000.
CORRECTIONS SERVICES, INC.
BY:/s/Norman 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 28, 2000
/s/Norman Becker
Norman H. Becker
(ii) Principal Financial and Secretary March 28, 2000
Accounting Officer
/s/Diane Martini
Diane Martini
(iii) A Majority of the Board of
Directors
/s/Frank Bauer Director March 28, 2000
Frank Bauer
/s/Norman Becker Director March 28, 2000
Norman H. Becker
Director March __, 2000
Eugene M. Kennedy
/s/Robert Yeakle Director March 28, 2000
Robert B. Yeakle