SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
For the quarterly period ended September 30, 2000
[ ] 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)
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-QSB. [ ]
<PAGE>
The issuer is a developmental stage company, and as such has yet to generate
any revenues.
As of November 6, 2000, the issuer 9,255,292 had shares of common stock
outstanding.
Documents incorporated by reference: NONE
Transition Small Business Disclosure Format (check one): YES [ ] NO [X]
STANFIELD EDUCATIONAL ALTERNATIVES, INC.
Form 10-QSB Index
September 30, 2000
Page
----
PART I: Financial Information . . . . . . . . . . . . . . . . . . 3
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . . 3
Condensed Balance Sheet (Unaudited) . . . . . . . . . . . 3
Condensed Statements of Operations (Unaudited) . . . . . . 4
Condensed Statement of Cash Flows
July-September, 2000 (Unaudited) . . . . . . . . . . . . 5 #
Condensed Statement of Cash Flows
January - September, 2000 (Unaudited). . . . . . . . . . 6
Notes to Financial Statements. . . . . . . . . . . . . . . 7
Item 2. Management's Discussion and Analysis or
Plan of Operation. . . . . . . . . . . . . . . . . . . . 10
PART II: Other Information. . . . . . . . . . . . . . . . . . . . . 11
Item 3. Legal Proceedings. . . . . . . . . . . . . . . . . . . . . 11
Item 4. Change in Securities . . . . . . . . . . . . . . . . . . . 11
Item 5. Defaults Upon Senior Securities. . . . . . . . . . . . . . 11
Item 6. Submission of Matters to a Vote of Security Holders. . . . 11
Item 7. Other Information. . . . . . . . . . . . . . . . . . . . . 12
Item 8. Exhibits and Reports on Form 8-K . . . . . . . . . . . . . 12
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
<PAGE> 2
PART I. - FINANCIAL INFORMATION
-------------------------------
Item 1. Financial Statements
STANFIELD EDUCATIONAL ALTERNATIVES, INC.
(a development stage company)
CONDENSED BALANCE SHEET
(Unaudited)
Sept. 30, 2000
--------------
ASSETS:
Current Assets :
Cash $ 2,778
Accounts Receivables 8,858
Other Current Assets 10,745
------------
Total Current Assets $ 22,381
Property and Equipment (net) 235,649
Intangible Assets (net) 339,231
Other Assets 46,632
------------
Total Assets $ 643,893
============
LIABILITIES & STOCKHOLDER'S EQUITY:
Current Liabilities:
Due to Related Parties $ 22,492
Other Current Liabilities 204,367
------------
Total Current Liabilities $ 226,859
Long-term Liabilities 174,173
------------
Total Liabilities $ 401,032
============
Stockholder's Equity:
Common Stock $ 1,378,436
Accumulated Deficit (1,135,575)
------------
Total Stockholder's Equity $ 242,861
============
Total Liabilities and Stockholder's Equity $ 643,893
============
See accompanying notes.
<PAGE> 3
STANFIELD EDUCATIONAL ALTERNATIVES, INC.
(a development stage company)
CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDING 9/30/00 AND 9/30/99
(Unaudited)
<TABLE>
<CAPTION>
Sept. 30, 2000 Sept. 30, 1999
-------------- --------------
<S> <C> <C>
Gross Revenues $ 13,255 $ 0
Operating Expenses $ 254,927 $ 87,508
Other Expenses:
Interest Expense 4,281 0
-------------- --------------
Net Loss $ 245,955 $ 87,508
============== ==============
Basic Net Loss Per Common Share $ 0.027 $ 0.058
============== ==============
Weighted Average Shares Outstanding 9,109,763 1,510,000
============== ==============
</TABLE>
[CAPTION]
STANFIELD EDUCATIONAL ALTERNATIVES, INC.
(a development stage company)
CONDENSED STATEMENT OF OPERATIONS
FOR THE NINE MONTHS ENDING 9/30/00 AND INCEPTION TO 9/30/99
(Unaudited)
<TABLE>
<CAPTION>
March 23, 1999
(inception) thru
Sept. 30, 2000 Sept. 30, 1999
-------------- ---------------
<S> <C> <C>
Gross Revenues $ 24,978 $ 0
Operating Expenses $ 916,984 $ 168,061
Other Expenses:
Interest Expense 9,600 166
-------------- --------------
Net Loss $ 901,607 $ 168,227
============== ==============
Basic Net Loss Per Common Share $ 0.112 $ 0.111
============== ==============
Weighted Average Shares Outstanding 8,038,152 1,510,000
============== ==============
</TABLE>
See accompanying notes.
<PAGE> 4
STANFIELD EDUCATIONAL ALTERNATIVES, INC.
(a development stage company)
CONDENSED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDING 9/30/00 AND 9/30/99
(Unaudited)
<TABLE>
<CAPTION>
Sept. 30, 2000 Sept. 30, 1999
-------------- --------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $ (245,955) $ (87,508)
Adjustments to Reconcile Net Loss to Net Cash
Used by Operating Activities:
Depreciation and Amortization 37,094 0
Loss on Disposal of Assets 3,100 0
Increase/(Decrease) in cash caused by changes in:
Other Assets 11,758 (1,637)
Other Liabilities 140,388 14,095
-------------- --------------
Net Cash Used by Operating Activities $ (53,615) $ (75,050)
-------------- --------------
Cash Flows Used in Investing Activities:
Acquisition of Property and Equipment $ (6,701) $ (2,056)
-------------- --------------
Cash Flows From Financing Activities:
Proceeds From Issuance of Capital Stock $ 35,900 $ 73,178
Proceeds From Issuance of Notes Payable 38,472 0
Payments on Notes Payable (13,875) 0
-------------- --------------
Net Increase in Financing Activities $ 60,497 $ 73,178
-------------- --------------
Net Increase/(Decrease) in Cash and Cash Equivalents $ 181 $ (3,928)
Cash and Cash Equivalents - Beginning of Period 2,597 5,687
-------------- --------------
Cash and Cash Equivalents - End of Period $ 2,778 $ 1,759
============== ==============
Supplemental Disclosure of Cash Flow Information:
Cash Paid For Interest $ 4,281 $ 0
============== ==============
</TABLE>
See accompanying notes.
<PAGE> 5
STANFIELD EDUCATIONAL ALTERNATIVES, INC.
(a development stage company)
CONDENSED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDING 9/30/00 AND INCEPTION TO 9/30/99
(Unaudited)
<TABLE>
<CAPTION>
March 23, 1999
(inception) thru
Sept. 30, 2000 Sept. 30, 1999
-------------- ----------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $ (901,607) $ (168,227)
Adjustments to Reconcile Net Loss to Net Cash
Used by Operating Activities:
Depreciation and Amortization 97,830 40
Loss on Disposal of Fixed Assets 3,100 0
Stock Issued for Services 330,000 0
Increase/(Decrease) in cash caused by changes in:
Other Current Assets (17,930) (2,337)
Other Assets (46,632) 0
Other Liabilities 156,139 32,127
-------------- ---------------
Net Cash Used by Operating Activities $ (379,100) $ (138,477)
-------------- ---------------
Cash Flows Used in Investing Activities:
Acquisitions/Sale of Property and Equipment $ (194,254) $ (11,524)
-------------- ---------------
Cash Flows From Financing Activities:
Proceeds From Issuance of Capital Stock $ 804,902 $ 151,680
Decrease Due to Shareholders (421,108) 0
Payments on Notes Payable (13,198) 0
Proceeds From Issuance of Notes Payable 174,173 0
-------------- ---------------
Net Increase in Financing Activities $ 544,769 $ 151,680
-------------- ---------------
Net Increase/(Decrease) in Cash and Cash Equivalents $ (28,585) $ 1,758
Cash and Cash Equivalents - Beginning of Period 31,363 0
-------------- ---------------
Cash and Cash Equivalents - End of Period $ 2,778 $ 1,758
============== ===============
Supplemental Disclosure of Cash Flow Information:
Cash Paid For Interest $ 9,600 $ 166
============== ===============
Non-cash Activity:
Issued 350,000 Common Shares to Retire Debt $ 350,000 $ 0
Issued 750,000 Common Shares for Services 330,000 0
-------------- ---------------
Total Non-Cash Activity $ 680,000 $ 0
============== ===============
</TABLE>
See accompanying notes.
<PAGE> 6
STANFIELD EDUCATIONAL ALTERNATIVES, INC.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
(1) Summary of Significant Business and Accounting Policies
(a) Basis of Presentation
The accompanying unaudited, condensed financial statements of
Stanfield Educational Alternatives, Inc. (the "Company") have
been prepared in accordance with the instructions and
requirements of Form 10-QSB and Regulation S-B and, therefore,
do not include all information and footnotes for a fair
presentation of financial position, results of operation and
cash flow in conformity with GAAP. In the opinion of
management, all adjustments (consisting of normal recurring
accruals) considered necessary have been included. Operating
results for this three-month period ended September 30, 2000,
are not necessarily indicative of the results that may be
expected for the year ended December 31, 2000.
(b) 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 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 assets and satisfy its liabilities on a timely basis in
the normal course of its operations. See note 9 to the
December 31, 1999 financial statements for a discussion of
management's plans and intentions.
<PAGE> 7
(c) 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.
(d) 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.
(e) Loss Per Share
Loss per share amounts are based on the weighted average
shares outstanding of 9,109,763 for the period ended September
30, 2000.
(2) Property and Equipment
At September 30, 2000, property and equipment consists of the
following:
Computer Software $ 44,107
Computer Equipment 64,912
Furniture & Fixtures 99,525
Equipment 30,166
Costumes 5,750
Learning Materials 29,993
------------
Total Property and Equipment $ 274,452
Less Accumulated Depreciation 38,803
------------
Net Property and Equipment $ 235,649
============
<PAGE> 8
(3) Intangible Assets
At September 30, 2000, intangible assets consists of the
following:
Writer's Consent $ 245
Literary Properties 15,000
Intellectual Properties 384,108
------------
Total Other Assets $ 399,353
Less Accumulated Amortization 60,122
------------
Net Other Assets $ 339,231
============
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.
(4) 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 September 30, 2000, the Company had issued
9,194,252 shares of common stock.
(5) Income Tax
The Company has no provision for taxes as it has a net operating
loss of approximately $1,135,575 that expires in varying times
through the year 2016. No deferred asset has been recorded, as
the possibility of benefiting from the net operating loss is
dependent on the Company achieving profitable operations.
(6) 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 accounts payable in the condensed
balance sheet.
<PAGE> 9
(7) Management Plans and Intentions
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 opened its first corporate Ed-vancement center on
April 24th, 2000, and plans to open additional centers. However,
as of September 30, 2000, 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.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10-QSB contains 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 1999, the Company's focus was to find a suitable partner
to execute its business plan. This was realized with the share
exchange of Stanfield Educational Alternatives, Inc. on December 10,
1999 with Innovative Technology Systems, Inc.. The Company's focus in
the Year 2000 has been and will be to develop and utilize the
Company's proprietary products by opening corporate Ed-vancement
Centers and the sale of franchised Ed-vancement Centers. The first
Center was opened on April 24, 2000. During this quarter, the company
also signed a letter of intent to acquire Rivky's Art Workshop in New
York City, NY. This not only added additional revenue for the company
through Rivky's curriculum, but will also be the site of its second
Center further enhancing the Company's underlying fundamentals.
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
<PAGE> 10
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 has opened its
first corporate Ed-vancement Center on April 24, 2000 in Jacksonville,
Florida with additional corporate Centers to be opened by the end of
the Year 2000. In addition, the Company plans to start selling
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.
PART II - OTHER INFORMATION
===========================
Item 3. Legal Proceedings
As of September 30, 2000, the Company is not aware of any legal
proceeding pending against it.
Item 4. Change in Securities
No change in securities occurred during the quarter ended
September 30, 2000.
Item 5. Defaults Upon Senior Securities
No defaults upon senior securities occurred during the quarter
ended September 30, 2000.
Item 6. Submission of Matters to a Vote of Security Holders
No issues were submitted to a vote of security holders during
the quarter ended September 30, 2000.
<PAGE> 11
Item 7. Other Information
None.
Item 8. Exhibits and Reports on Form 8-K
(a) Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended
June 30, 2000.
SIGNATURES
----------
Stanfield Educational Alternatives, Inc.
By /s/ Lawrence W. Stanfield
----------------------------------------------
Lawrence W. Stanfield, Chief Executive Officer
Date: November 13, 2000
<PAGE> 12
