SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] Annual report under Section 13 or 15(d) of the Securities Exchange
Act of 1934
For the fiscal year ended December 31, 1999
[ ] Transition report under Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the transition period from ________ to _________
Commission File Number: 000-25947
STANFIELD EDUCATIONAL ALTERNATIVES, INC.
---------------------------------------------
(Name of Small Business Issuer in its Charter)
Formally Innovative Technology Systems, Inc.
FLORIDA 65-0386286
------------------ -----------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1025 S. Semoran Blvd., Ste. 1093, Winter Park, FL 32792-5524
------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
877-732-9162
------------
(Issuer's Telephone Number)
Securities registered under Section 12(b) of the Exchange Act:
Title of each Class: NONE Name of Each Exchange on
Which Registered: NONE
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, no par value
--------------------------
(Title of Class)
Check whether the issuer: (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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. [X] YES [ ] NO
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-KSB or any amendment to this Form 10-KSB. [ ]
The issuer is a developmental stage company, and as such has yet to
generate any revenues.
As of March 22, 2000, the issuer had 7,680,876 shares of common stock
outstanding.
Documents incorporated by reference: NONE
Transition Small Business Disclosure Format (check one): YES [ ] NO [X]
1
<PAGE>
INDEX
PART I.
Page
No.
- ---
Item 1. Business..........................................1
Item 2. Properties........................................3
Item 3. Legal Proceedings.................................4
Item 4. Submission of Matters to a Vote of Security
Holders...........................................4
PART II.
Item 5. Market for Registrant's Common Equity and Related
Stockholders Matters..............................4
Item 6. Selected Financial Data...........................4
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............5
Item 8. Financial Statements and Supplementary
Data..............................................7
Item 9. Changes in Disagreements with Accountants on
Accounting and Financial Disclosure...............7
PART III.
Item 10. Directors and Executive Officers of the
Registrant........................................7
Item 11. Executive Compensation............................7
Item 12. Security Ownership of Certain Beneficial
Owners and Management.............................8
Item 13. Certain Relationships and Related Parties.........8
PART IV.
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K...........................9
SIGNATURES
2
<PAGE>
PART I.
-------
Item 1. Business
Stanfield Educational Alternatives, Inc.(formerly known as
Innovative Technology Systems, Inc.) (the "Company") is
presently a development stage company. Recently the company was
successful in concluding the purchase of a business through an
exchange of capital stock which has resulted in the Company
entering into the education business.
Prior to the purchase of the educational business by the
Company, on November 11, 1999, Larry Stanfield, the majority
shareholder of Stanfield Educational Alternatives, Inc. (which,
as a result of a name swap with Innovative, is now known as
Innovative Technology Systems, Inc.)1, entered into an agreement
with John Byslma, the majority shareholder of Innovative
Technologies, Inc. (which, as a result of a name swap, is now
know as Stanfield Educational Alternatives, Inc.)[1] , to acquire
his (Mr. Byslma's) 4,473,000 control shares of Innovative
Technologies Inc. As a result of this transaction, Mr. Stanfield
controls a majority of the shares of Innovative, as well as a
majority of the shares of Stanfield.
On December 10, 1999, Innovative Technology Systems, Inc.
entered into an agreement with the majority shareholders of
Stanfield Educational Alternatives, Inc. to purchase one hundred
(100%) percent of the issued and outstanding shares in a tax-
free exchange of shares. The share agreement allowed Stanfield
Educational Alternatives' shareholders to receive 1 share of
Innovative Technology Systems, Inc. common stock in exchange for
2 shares of Stanfield's common stock. A copy of this agreement
has previously filed been filed with the Commission on December
16, 1999 on Form 8-K.
Thereafter, Innovative Technology Systems, Inc. and
Stanfield Educational Systems, Inc., on January 12, 2000
concluded a name swap. Presently, Innovative is a wholly owned
subsidiary of Stanfield.
The Company is a unique, progressive educational
corporation and franchisor of the Company Ed-vancement Centers,
a network that provides a comprehensive range of educational and
tutorial services to individuals of all ages. The Company also
develops and publishes a variety of specialized educational
programs including a computer global Internet educational campus
in various languages. The Company's research and development
division develops a variety of educational programs for children
of all ages for both video and television production.
The Company's principal and proprietary products include
the Easy Reader I System (for students in grades 1-3), the Easy
Reader II System (for students in grades 4-6) and the Sound
Factory System (a phonics program for grades 1-9). In addition,
the Company will use a variety of commercially available
educational products and services to create full service
educational centers that can be utilized by clients from grade
school through adulthood.
____________________
[1] On January 12, 2000, Stanfield Educational Alternatives, Inc. and
Innovative Technology Systems, Inc. swapped names, as is reflected in
the 8-K filed simultaneously with this 10-KSB filing, which resulted in
the registrant now being known as "Stanfield Educational Alternatives, Inc."
3
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The Company's investment in intellectual properties extends
beyond programs, services and textbooks to the proprietary
characters that populate them. Young students will enjoy the
adventures of Jumping Monkey, Blue Fish, Funny Airplane and a
host of other copyrighted and trademarked characters.
The Company continually conducts research and development
of new products via its R&D Division. This allows the Company
to offer new products as well as enhance current products.
The K-12 education market, the primary (but by no means
exclusive) focus of the Company's efforts, is the largest
segment of the education industry with approximately $360
billion spent annually. Despite that size, many analysts
recognize it as the most problematic for investors because there
are so few investment opportunities in this highly bureaucratic
and inefficient (less than $0.50 of every public school dollar
is spent in the classroom) sector. Management believes
increased accountability and parental involvement will create
significant demand for the kind of supplemental tutoring for
kids that the Company was created to deliver.
The Company, even though it is in development stage, is
based upon the two and half decades of research and development
of its founder, Lawrence W. Stanfield, and has patterned its
business model after the successful franchisers such as those
listed in the following paragraph entitled "Competitors."
Unlike those companies, which only deliver commercially
available courseware, the Company utilizes a unique,
"proprietary" learning system that is child friendly and
populated with copyrighted animated characters and an innovative
Internet based diagnostic tool.
It is the Company's intent to compete at the franchise
level with superior products, innovative technology and an
initial tight marketing focus on learning disabilities. The
Company also enjoys a proprietary product that is readily
adaptable to Internet delivery and is thus potentially scalable
to mass audience. At the corporate level, the Company believes
it can compete successful in the sale of franchises due to the
enormous demand.
Marketing
The Company utilizes a national and local marketing/advertising
public relations firm. The Company has also developed its website that
can be accessed at www.helpingkids.com.
Competition
The Company's competition is a fragmented landscape from "mom and pop
consultants to a handful of nationally known educational service companies.
The major players are: Huntington Learning Centers, Kaplan, Kumon USA and
Sylvan Learning Systems.
Government Regulation
The sales of franchises are regulated by various state
authorities as well as the Federal Trade Commission (the "FTC").
The FTC requires that franchisors make extensive disclosure to
4
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prospective franchisees but does not require registration. A
number of states require registration and prior approval of the
franchise-offering document. In addition, several states have
"franchise relationship laws" or "business opportunity laws"
that limit the ability of a franchisor to terminate franchise
agreements or to withhold consent to the renewal or transfer of
these agreements. While the Company's believes its franchising
operations will not be materially adversely affected by such
existing regulation, the Company cannot predict the effect of
any future legislation or regulation.
Trademarks and Copyrights
The Company has applied for federal trademark registration
for the following items:
* Stanfield Educational Alternatives, Inc.
* Stanfield Ed-vancement Centers
* Company logo with name
* Stanfield Interactive Database
* SID
* Easy Reader System I
* Easy Reader System II
* Sound Factory System
* Jumping Monkey
* Blue Fish
* Funny Airplane
* Bookworm
In addition, the Company has applied for copyright protection
for all 71 of its characters that are utilized throughout the
proprietary, educational materials.
Employees
As of December 31, 1999, the Company had six employees.
All employees were considered full-time and none are represented
by a union. The Company believes its relationship with its
employees to be good.
Environmental Laws
The Company is in compliance with all environmental laws.
Future compliance with environmental laws is not expected to
have a material effect on the business.
Item 2. Properties
The Company leases all its facilities for administrative
office space and Ed-vancement Centers. The Company currently
has three leased properties in the State of Florida:
Jacksonville (site of the first Ed-vancement Center), Orlando
(corporate offices) and Vero Beach (research and development
offices).
5
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Item 3. Legal Proceedings
As of December 31, 1999, the Company is not aware of any
legal proceeding pending against it.
Item 4. Submission of Matters to a Vote of Security Holders
During the year, no issues were submitted to a vote of
security holders.[2]
PART II
-------
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters
The Company has submitted all required filings to the NASD
for listing of its securities on the NASD Over-the-Counter
Bulletin Board interdealer trading system. The Company's
trading symbol will be IVYY. No dividends were declared on the
Company's common stock during the year ended December 31, 1999,
and the Company does not anticipate paying dividends in the
future.
The Company has authorized the issuance of 50,000,000
shares of common stock. The Company entered into an agreement
with the majority shareholders of Stanfield Educational
Alternatives, Inc. (prior to the name change) to purchase all
issued and outstanding shares through a tax-free share exchange.
The Agreement provided for Stanfield Educational Alternatives,
Inc. shareholders to receive 1 share of Innovative Technology's
common stock in exchange for 2 shares of Stanfield Educational
common stock. This resulted in an additional issuance of
755,000 shares of Innovative Technology Systems, Inc. common
stock. As of December 31, 1999 there were 6,855,000 shares of
the Innovative Technology Systems, Inc. common stock outstanding
(as a result of the name change, as set forth herein, these
shares are now Stanfield Educational Alternatives, Inc. shares).
Item 6. Selected Financial Data
The selected financial data for the year ended December 31,
1999, is derived from Innovative Technology Systems, Inc.
financial statements which have been audited by Tedder, James,
Worden and Associates, P.A. The financial data should be read
in conjuncture with the historical Financial Statements and
Notes thereto.
____________________
[2] As the result of a subsequent event, on January 7, 2000, the
shareholders voted to change the name of the Company from
Innovative Technology Systems, Inc. to Stanfield Educational
Systems, Inc.
6
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Statement of Operations Data:
Revenues $ 0
Operating Expenses:
Personnel Expenses 131,822
General and Administrative Costs
99,446
----------
Operating Loss $ 231,268
Depreciation Expense 1,096
Interest Expense 1,604
Income Taxes 0
----------
Net Loss $ 233,968
Loss Per Diluted Share $ 0.038
----------
Balance Sheet Data (at period end):
Cash and Cash Equivalents $ 31,363
Prepaid Expenses 1,673
Property and Equipment (net) 82,422
Other Assets (net) 399,134
----------
Total Assets $ 514,592
----------
Liabilities (current and long-term) (See 1) $ 505,526
Stockholders' Equity 9,066
----------
Total Liabilities and
Stockholder's Equity $ 514,592
----------
(1) This amount includes a note due to The National
Children's Research Foundation in the amount of $443,600
payable in the Company's shares. This note was derived
from the Company's purchase of The National Children's
Reading Foundation's intellectual properties and certain
fixed assets.
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
FORWARD LOOKING STATEMENTS
All statements contained herein that are not historical
facts, including but not limited to, statements regarding the
anticipated impact of future capital requirements and future
development plans are based on current expectations. These
statements are forward looking in nature and involve a number of
risks and uncertainties. Actual results may differ materially.
Among the factors that could cause actual results to differ
materially are the following: amount of revenues earned by the
Company's tutorial and teacher training operations; the
availability of sufficient capital to finance the Company's
business plan on terms of satisfactory to the Company; general
business and economic locations; and other risk factors
described in the Company's reports filed from time to time with
the Commission. The Company wishes to caution readers not to
place undue reliance on any such forward looking statements,
which statements are made pursuant to the Private Securities
Litigation Reform Act of 1995 and, as such, speak only as of the
date made.
During the past year, the Company's focus was to find a
suitable partner to effect a business combination. This was
realized with the share exchange of Stanfield Educational
Alternatives, Inc. on December 10, 1999. The Company's focus in
the Year 2000 will be to develop and utilize the Company's
7
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proprietary products by opening corporate Ed-vancement Centers
and the sale of franchised Ed-vancement Centers.
The classic "big investment opportunity" is a company that
has a solution to a problem. The more significant the problem,
the larger the investment potential and this is an enormous
problem as of today. The United States currently spends $740
billion per year on education, more than we spend on national
defense, yet:
* 43% of our forth graders cannot pass a basic reading
test;
* Nearly half of all high school graduates have not
mastered seventh grade arithmetic;
* Approximately 50% of all students entering the
California State University system are not ready for
college level English and math; and
* 42 million adults in this nation are functionally
illiterate.
In the U.S. knowledge-based economy, there is no bigger problem
than the need for a better-educated populace, yet surprisingly,
there are few vehicles for investors to participate in this
potential. Against this backdrop is a new work culture of a
lifetime of learning, representing a huge secular trend of
workers perusing what are in effect forty-year degrees rather
than four-year degrees of their parents. Education remains a
fragmented landscape with lots of vendors and no dominant
players, which in turn creates opportunities for branding,
consolidation and economies of scale.
The Company was formed to commercially provide an
alternative learning environment utilizing pioneering work in
the field of educating children and adults, especially those
with learning disabilities, by Lawrence W. Stanfield, MS. Using
proprietary courseware and an innovative Internet based
diagnostic system called "SID," the Company has developed a
uniform tutoring model that can be used anywhere in the world.
More importantly, it is a model that has raised the reading
comprehension of seventy-five percent of students by two grade
levels in thirty-six hours of instruction and it is a model that
can be adapted to emerging distance learning technologies such
as the Internet.
The Company is in the business of providing educational
services using a combination of proprietary and commercially
available materials to offer the widest possible range of
tutorial services. The Company has elected to build corporate
owned centers in the State of Florida and franchise centers
elsewhere, as the fastest, most cost effective method of growing
the business. The Company is scheduled to open its first
corporate Ed-vancement Center on April 24, 2000 in Jacksonville,
Florida with two additional corporate Centers to be opened by
the end of the Year 2000. In addition, the Company plans to
sell 25 franchises by the end of Year 2000.
Revenue generators for the Company include:
* Operating income from corporate owned Ed-vancement
centers (includes revenue generated from tutorial,
computer, test preparation such as SAT or GMAT,
HomeWorkshop and "one-to-one" counseling fees);
* Franchise fees from the sale of franchises;
* Royalty fees of nine percent of gross revenues
generated from franchised Centers;
* Transaction fees for accessing Internet diagnostic
tool and CBT courses;
* Merchandising of proprietary characters; and
* Video and books sales derived from proprietary
characters and information.
8
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Item 8. Financial Statements and Supplementary Data
PART F/S
The Company's financial statements for the year ending 1999
has been examined to the extent indicated in their reports by
Tedder, James, Worden and Associates, P.A., independent
certified accountants, and have been prepared in accordance with
generally accepted accounting principles and pursuant to
Regulation S-B as promulgated by the Securities and Exchange
Commission and are included herein. The financial statements
follow this Form 10-KSB, and are included as Exhibits, hereto.
Item 9. Changes in Disagreements with Accountants on
Accounting and Financial Disclosure
The Company has no disagreements with the accountants
pertaining to any accounting or financial disclosures.
PART III
Item 10. Directors and Executive Officers of the Registrant
Chief Executive Officer - Lawrence W. Stanfield, MS (54)
Lawrence W. Stanfield, MS, is the Company's founder and
creator of the instructional materials and methodologies that
are the heart of the Company. Mr. Stanfield has been a leader
in the educational industry for over three decades. Prior to
his current position, Mr. Stanfield was the President of The
National Children's Reading Foundation (a not-for-profit
tutorial center) for the past five years.
Item 11. Executive Compensation
The following table sets forth the compensation received by officers.
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
- ------------------------------------------------------------------------------------------------------------------
Annual Compensation Long-Term Compensation
--------------------------------------- --------------------------
Annual Compensation Awards Payouts
------------------- ----------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name and Other Restricted Securities All
Principal Annual Stock Underlying LTIP Other
Position Year Salary Bonus(2) Compensation Awards Options Payouts Compensation
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lawrence W. 1999 $ 66,000 -0- -0- -0- -0- -0- -0-
Stanfield, C.E.O. 1998 $ -0- -0- -0- -0- -0- -0- -0-
(since 1/15/93) 1997 $ -0- -0- -0- -0- -0- -0- -0-
Persons (1)(2)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
9
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The Company plans to form a Compensation Committee, which
will be responsible for compiling suitable compensation for
current and future officers that will be employed by the
Company.
On January 1, 2000, the Company hired William K. Price (36)
as Executive Vice President and Chief Operating Officer. Mr.
Price brings expertise in operations that include planning and
execution of investor/consumer campaigns designed to build a
stable and broad base for publicly traded companies. Mr. Price
was formally President of Rainbow Communications, a subsidiary
of a publicly held national PR/investor relations company. Mr.
Price had been serving this role as a consultant prior to
accepting this position as an employee of the Company. Mr.
Price's annual compensation is $66,000.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Table 1. Security Ownership of Certain Beneficial Owners
-----------------------------------------------
<TABLE>
<CAPTION>
(1) (2) (3) (4)
Name of Amount and Nature Percent
Title of Beneficial of Beneficial of
Class Owner Ownership Class(1)
- -------- ---------- ----------------- --------
<S> <C> <C> <C>
Common Stock None None None
</TABLE>
Table 2. Security Ownership of Management
--------------------------------
<TABLE>
<CAPTION>
Name of Amount and Nature Percent
Title of Beneficial of Beneficial of
Class Owner Ownership Class(1)
- -------- ---------- ----------------- --------
<S> <C> <C> <C>
Common Stock Lawrence W. Stanfield 3,870,000 50%
</TABLE>
Item 13. Certain Relations and Related Parties
The President and principal stockholder and certain
employees have made advances to the Company. The advances are
non-interest bearing and were made principally for working
capital purposes. These advances are included in due to related
parties in the accompanying balance sheet stated set forth under
Item 8 herein.
On December 30, 1999, the Company entered into an agreement
with The National Children's Reading Foundation to purchase
intellectual properties and certain fixed assets at fair market
value. Lawrence W. Stanfield, CEO and President of the Company,
is the sole shareholder of The National Children's Reading
Foundation.
10
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PART IV
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Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
ITEMS 1 AND 2. INDEX TO AND DESCRIPTION OF EXHIBITS
(a) EXHIBIT No. EXHIBIT NAME
- ---------------- ------------
3(i) Certificate of Incorporation [3]
3(ii) Bylaws [3]
(b) Reports on Form 8-K
- ------------------------
The Company, on December 16, 1999 filed on form 8-K information,
pursuant to Item 1, "Changes in Control of Registrant" and Item 2, "Acquisition
or Disposition of Assets" supplying the required information pursuant to the
Act. These Changes have been reflected in this Form 10-KSB filing.
The Company on January 24, 2000 filed on form 8-K information,
pursuant to Item 5., "Other Events" supplying the required inforamtion
regarding the Company's name change and adoption of amended and restated
articles of incorporation. In addition, the Company filed information,
pursuant to Item 7., "Financial Statements and Exhibits" relating to the
Share Exchange between the Registrant and Stanfield Educational Alternatives,
Inc. wherein the Registrant acquired all of the outstanding shares of
Stanfield Educational Alternatives, Inc. These changes have been reflected
in this Form 10-KSB filing.
Index to Financial Statements
Independent Auditors' Report ..........................................1
1999 Balance Sheets....................................................2
1999 Statements of Operations..........................................3
1999 Statements of Stockholder's Equity................................4
1999 Statement of Cash Flows...........................................5
Notes to Financial Statements..........................................6
SIGNATURES
----------
Innovative Technology Systems, Inc.
By /s/ Lawrence W. Stanfield
- - - - - - - - - - - - - - - - - - - - - - -
Lawrence W. Stanfield, Chief Executive Officer
Date: April 12, 2000
____________________
[3] Previously filed as an exhibit to our registration statement of
Form 10-SB, (the "Registration Statement") which was originally
filed on May 3, 1999, and incorporated herein by reference.
11
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Financial Statements
(With Independendent Auditors' Report Thereon)
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(A Development Stage Company)
December 31, 1999
<PAGE>
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(A Development Stage Company)
Table of Contents
Independent Auditors' Report............................................1
Financial Statements:
Balance Sheet...........................................2
Statement of Operations.................................3
Statement of Stockholders' Equity.......................4
Statement of Cash Flows.................................5
Notes to Financial Statements...........................................6
<PAGE>
Independent Auditors' Report
----------------------------
The Stockholders and Board of Directors
Innovative Technology Systems, Inc.:
We have audited the accompanying balance sheet of Innovative Technology
Systems, Inc. (a development stage company) as of December 31, 1999 and the
related statement of operations, stockholders' equity and cash flows for the
period March 23, 1999 (inception) to December 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Innovative Technology
Systems, Inc. as of December 31, 1999 and the results of its operations and its
cash flows for the period March 23, 1999 (inception) to December 31, 1999, in
conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Innovative Technology Systems, Inc. will continue as a going concern. As
discussed in notes 1 and 9 to the consolidated financial statements, the
Company's net loss during the development period and the need to obtain
substantial additional funding to complete its development, raises substantial
doubt about the entity's ability to continue as a going concern. Management's
plans and intentions with regard to these matters are discussed in note 9.
The consolidated financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
/s/Tedder, James, Worden & Associates, P.A.
January 26, 2000
Orlando, Florida
<PAGE>
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(A Development Stage Company)
Balance Sheet
December 31, 1999
Assets
------
Current assets:
Cash $ 31,363
Prepaid expenses 1,673
---------
Total current assets $ 33,036
Property and equipment, net 82,422
Other assets 399,134
---------
Total assets $ 514,592
=========
Liabilities and Stockholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 22,000
Accrued expenses 26,228
Due to related parties 443,600
Notes payable 13,698
---------
Total current liabilities $ 505,526
=========
Stockholders' equity:
Common stock $ 243,034
Accumulated deficit (233,968)
---------
Total stockholders' equity $ 9,066
---------
Total liabilities and stockholders' equity $ 514,592
=========
See accompanying notes to financial statements.
<PAGE> 2
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(A Development Stage Company)
Statement of Operations
For the period March 23, 1999 (inception) to December 31, 1999
Operating expenses $ 232,364
Other expenses:
Interest expenses 1,604
---------------
Total expenses 233,968
---------------
Net loss $ 233,968
===============
Basic EPS:
Net loss per common share $ 0.038
===============
See accompanying notes to financial statements.
<PAGE> 3
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(A Development Stage Company)
Statement of Stockholders' Equity
For the period March 23, 1999 (inception) to December 31, 1999
<TABLE>
<CAPTION>
Common stock Additional Accumulated
---------------
Shares Amount Paid in Capital deficit Total
------------ ----------- ----------------- --------- ----------
<S> <C> <C> <C> <C> <C>
Balance, March 23, 1999 (inception) - $ - - - -
Issuance of stock 1,510,000 1,510 241,524 - 243,034
Shares issued to reflect recapitalization
of reverse acquisition 5,345,000 241,524 (241,524) - -
Net loss - - - (233,968) (233,968)
------------ ----------- ----------------- --------- ----------
Balances, at December 31, 1999 6,855,000 $ 243,034 - (233,968) 9,066
============ =========== ================= ========= ==========
</TABLE>
See accompanying notes to financial statements.
<PAGE> 4
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(A Development Stage Company)
Statement of Cash Flow
For the period March 23, 1999 (inception) to December 31, 1999
Cash flows from operating activities:
Net loss $ (233,968)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation & amortization 1,096
Cash provided by changes in:
Prepaid expenses (1,673)
Accounts payable 22,000
Accrued expenses 26,228
Due to related parties 44,247
-----------
Net cash used by operating activities $ (142,070)
Cash flows from investing activities:
Acquisitions of property and equipment $ (83,299)
Cash flows from financing activities:
Proceeds from the issuance of capital stock $ 243,034
Proceeds from the issuance of notes payable 13,698
-----------
Net increase in financing activities $ 256,732
===========
Net increase in cash and cash
equivalents 31,363
Cash and cash equivalents - beginning of period -
-----------
Cash and cash equivalents - end of period $ 31,363
===========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 590
===========
Non-cash activity:
Purchase of other assets from related parties $ 399,353
===========
See accompanying notes to financial statments.
<PAGE> 5
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999
(1) Summary of Significant Business and Accounting Policies
(a) Organization
In December 1999, Innovative Technology Systems, Inc. (the "Company")
authorized and entered into an agreement effecting a tax-free exchange
in a reorganization pursuant to IRS Code 368(a)(1)(A). Pursuant to the
agreement, the Company exchanged one share of its previously authorized
but unissued shares of no par common stock in exchange for two shares
of Stanfield Educational Alternatives, Inc. ("Stanfield") common stock.
In accordance with the agreement, the Company acquired all of the
issued and outstanding shares of Stanfield in exchange for shares of
the Company. For accounting purposes, the acquisition has been treated
as an acquisition of Innovative Technology Systems, Inc. by Stanfield
and as a recapitilization ("Reverse Acquisition") of Stanfield. The
financial statements are those of Stanfield. Pro forma information
is not presented, since the combination is a recapitilization rather
than a business combination.
The Company is a unique, progressive educational corporation and
franchiser of the Stanfield Ed-vancement centers, a network that
provides a comprehensive range of educational and tutorial services
to individuals of all ages. The Company also develops and publishes
a variety of specialized educational programs including a computer
global internet educational campus in various languages. The
Company's research and development division develops a variety of
educational programs for children of all ages for both video and
television production.
The Company is in its development stage and needs substantial
additional capital to complete its development and to reach an
operating stage. The accompanying financial statements have been
prepared assuming that the Company will continue as a going concern,
and therefore, will recover the reported amount of its assts and
satisfy its liabilities on a timely basis in the normal course of
its operations. See note 9 to the financial statements for a
discussion of management's plans and intentions.
(b) Property and Equipment
Property and equipment are stated at cost. Depreciation for financial
statement purposes is computed using the straight-line method over the
estimated useful lives of the individual assets, which range from 3 to
5 years.
The Company has reviewed its long-lived assets and intangibles for
impairment and has determined that no adjustment to the carrying value
of long-lived assets is required.
<PAGE> 6
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999
(1) Summary of Significant Business and Accounting Policies, Continued
(c) Cash and Cash Equivalents
The Company considers all highly liquid investments with an original
maturity of three months or less to be cash equivalents.
(d) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenue and expenses during the reporting period. Actual results
could differ from those estimates.
(e) Income Taxes
The Company uses the asset and liability method of accounting for
income taxes. Under the asset and liability method, deferred tax
assets and liabilities are recognized for the future tax consequences
attributable to differences between the financial statements
carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are
measured using enacted tax rates expected to apply to taxable income
in the years in which those temporary differences are expected to be
recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date. Deferred tax assets
resulting principally from operating losses have not been recognized.
(f) Loss Per Share
Loss per share amounts are based on the weighted average shares
outstanding of 6,143,438 for the period ended December 31, 1999.
<PAGE> 7
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999
(1) Summary of Significant Business and Accounting Policies, Continued
(g) Comprehensive Income
In June 1997, the Financial Accounting Standards board 9FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 130, Reporting
Comprehensive Income, effective for fiscal years beginning after
December 15, 1997. SFAS No. 130 establishes standards for reporting
and display of comprehensive income and its components in a full
set of general-purpose financial statements. Comprehensive income
includes all changes in equity during a period except those resulting
from investments by owners and distributions to owners. The Company
adopted SFAS No. 130 in the current year; however, there were no changes
in equity during the period exclusive of contributed capital in
conjunction with the recapitilization and net loss. As such,
comprehensive income for the period ended December 31, 1999, is the
amount shown on the statement of operations and retained earnings
as net loss.
(2) Leases
The Company leases office and storage space under various
non-cancelable operating leases with the original lease term of one
year. The lease payments total $1,949 per month and total lease
payments from March 23, 1999 to December 31, 1999 totaled $13,967.
The leases generally provide for renewal provisions following the
initial one-year term.
(3) Property and Equipment
At December 31, 1999, property and equipment consist of the following:
Computer software $ 34,905
Computer equipment 16,082
Furniture and fixtures 12,658
Equipment 19,654
------------
83,299
Less accumulated depreciation (877)
------------
$ 82,422
============
<PAGE> 8
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999
(4) Other Assets
At December 31, 1999, other assets consist of the following:
Writer's consent $ 245
Literary properties 15,000
Intellectual properties 384,108
--------------
399,353
Less accumulated amortization (219)
--------------
$ 399,134
--------------
These assets were purchased from the National Children's Reading
Foundation on December 30, 1999. The National Children's Reading
Foundation is a not-for-profit company whose shares are held by
Lawrence Stanfield, who is a substantial shareholder of Stanfield
Educational Alternatives, Inc. These assets will be amortized
utilizing the straight-line method over a five-year life.
(5) Notes Payable
Notes payable consist of the following at December 31, 1999:
Note payable of $10,424 bearing interest at 10%, in default 10,424
Other various notes 3,274
---------
$ 13,698
---------
(6) Capitalization
The Company has authorized the issuance of 50,000,000 shares of common
stock, having no par value. In accordance with the agreement and plan
of share exchange the Company acquired all issued and outstanding shares
of common stock of Stanfield in exchange for shares of the Company. For
accounting purposes the transaction was treated as a recapitalization
("Reverse Acquisition"). At December 31, 1998, the Company had issued
6,855,000 shares of common stock.
<PAGE> 9
INNOVATIVE TECHNOLOGY SYSTEMS, INC.
(A Development Stage Company)
Notes to Financial Statements
December 31, 1999
(7) Income Tax
The Company has no provision for taxes as they have a net operating loss
of $ 233,968 that expires in varying times through the year 2015. No
deferred asset has been recorded, as the possibility of benefiting from
the net operating loss is dependent on the Company achieving profitable
operations.
(8) Related Party Transactions
The president and principal stockholder and certain employees have made
advances to the Company. The advances are non-interest bearing and were
made principally for working capital purposes. These advances are
included in due to related parties in the accompanying balance sheet.
(9) Management Plans and Intentions (Unaudited)
Management anticipates, through a combination of additional debt but
primarily equity financing, that the Company will successfully complete
the remaining research and development of its technology and determine
and implement its overall marketing strategy.
The Company is scheduled to open its first corporate Ed-vancement center
on April 24th, 2000, with two additional centers projected to open in the
fall of 2000. However, as of December 31, 1999, the success of achieving
the objectives discussed above, as well as the ultimate profitability of
the Company's operations once the development stage has ended, cannot be
determined.
(10)Subsequent Events
Subsequent to December 31, 1999, Innovative Technology Systems, Inc.
changed its name to Stanfield Educational Alternatives, Inc.
<PAGE> 10
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Balance
Sheet, Statement of Operations, Statement of Cash Flows and Notes thereto
incorporated in this Form 10-KSB and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 31,363
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 33,036
<PP&E> 83,299
<DEPRECIATION> (877)
<TOTAL-ASSETS> 514,592
<CURRENT-LIABILITIES> 505,526
<BONDS> 0
0
0
<COMMON> 243,034
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 514,592
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 232,364
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,604
<INCOME-PRETAX> (233,968)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (233,968)
<EPS-BASIC> (0.04)
<EPS-DILUTED> (0.04)
</TABLE>
