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 June 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.
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(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
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(Address of Principal Executive Offices) (Zip Code)
877-732-9162
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(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 July 19, 2000, the issuer had 9,059,252 shares of common stock
outstanding.
Documents incorporated by reference: NONE
Transition Small Business Disclosure Format (check one): YES [ ] NO [X]
<PAGE>
STANFIELD EDUCATIONAL ALTERNATIVES, INC.
Form 10-QSB Index
June 30, 2000
Page
----
PART I: Financial Information . . . . . . . . . . . . . . . . 3
Item 1. Financial Statements. . . . . . . . . . . . . . . . . 3
Condensed Balance Sheet (Unaudited). . . . . . . . . 4
Condensed Statements of Operations
(Unaudited) . . . . . . . . . . . . . . . . . . . . 5
Condensed Statement of Cash Flows
April - June, 2000 (Unaudited). . . . . . . . . . . 6
Condensed Statement of Cash Flows
January - June, 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)
June 30, 2000
ASSETS:
Current Assets :
Cash $ 2,597
Accounts Receivables 4,121
Other Current Assets 26,472
------------
Total Current Assets $ 33,190
Property and Equipment (net) 249,174
Intangible Assets (net) 359,199
Other Assets 46,632
------------
Total Assets $ 688,195
============
LIABILITIES & STOCKHOLDER'S EQUITY:
Current Liabilities:
Due to Related Parties $ 27,435
Other Current Liabilities 47,897
------------
Total Current Liabilities $ 75,333
Long-term Liabilities 160,714
------------
Total Liabilities $ 236,047
============
Stockholder's Equity:
Common Stock $ 1,342,536
Accumulated Deficit (890,388)
------------
Total Stockholder's Equity $ 452,148
============
Total Liabilities and Stockholder's Equity $ 688,195
============
See accompanying notes.
<PAGE> 3
STANFIELD EDUCATIONAL ALTERNATIVES, INC.
(a development stage company)
CONDENSED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDING 6/30/00 AND 6/30/99
(Unaudited)
<TABLE>
<CAPTION>
June 30, 2000 June 30, 1999
<S> <C> <C>
Gross Revenues $ 11,724 $ 0
Operating Expenses $ 478,673 $ 80,438
Other Expenses:
Interest Expense 4,297 166
------------- -------------
Net Loss $ 471,246 $ 80,604
============= =============
Basic EPS:
Net Loss Per Common Share $ 0.061 $ 0.053
============= =============
Weighted Average Shares Outstanding 7,721,695 1,510,000
============= =============
</TABLE>
STANFIELD EDUCATIONAL ALTERNATIVES, INC.
(a development stage company)
CONDENSED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDING 6/30/00 AND INCEPTION TO 6/30/99
(Unaudited)
<TABLE>
<CAPTION>
March 23, 1999
(inception) thru
June 30, 2000 June 30, 1999
<S> <C> <C>
Gross Revenues $ 11,724 $ 0
Operating Expenses $ 662,825 $ 80,552
Other Expenses:
Interest Expense 5,319 166
------------- -------------
Net Loss $ 656,420 $ 80,718
============= =============
Basic EPS:
Net Loss Per Common Share $ 0.087 $ 0.054
============= =============
Weighted Average Shares Outstanding 7,511,724 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 6/30/00 AND 6/30/99
(Unaudited)
<TABLE>
<CAPTION>
June 30, 2000 June 30, 1999
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $ (471,246) $ (80,604)
Adjustments to Reconcile Net Loss to Net Cash
Used by Operating Activities:
Depreciation and Amortization 35,207 40
Stock Issued for Services 330,000 0
Increase/(Decrease) in cash caused by changes in:
Other Assets (26,431) (700)
Other Liabilities (408,069) 17,842
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Net Cash Used by Operating Activities $ (540,539) $ (63,422)
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Cash Flows Used in Investing Activities:
Acquisitions of Property and Equipment $ (193,958) $ (9,468)
Cash Flows From Financing Activities:
Proceeds From Issuance of Capital Stock $ 589,052 $ 78,502
Proceeds From Issuance of Notes Payable 141,790 0
------------ -------------
Net Increase in Financing Activities $ 730,842 $ 78,502
------------ -------------
Net Increase/(Decrease) in Cash and Cash Equivalents $ (3,655) $ 5,612
Cash and Cash Equivalents - Beginning of Period 6,252 75
------------ -------------
Cash and Cash Equivalents - End of Period $ 2,597 $ 5,687
============ =============
Supplemental Disclosure of Cash Flow Information:
Cash Paid For Interest $ 4,297 $ 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> 5
STANFIELD EDUCATIONAL ALTERNATIVES, INC.
(a development stage company)
CONDENSED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDING 6/30/00 AND INCEPTION TO 6/30/99
(Unaudited)
<TABLE>
<CAPTION>
March 23, 1999
(inception) thru
June 30, 2000 June 30, 1999
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $ (656,420) $ (80,718)
Adjustments to Reconcile Net Loss to Net Cash
Used by Operating Activities:
Depreciation and Amortization 60,736 40
Stock Issued for Services 330,000 0
Increase/(Decrease) in cash caused by changes in:
Other Assets (28,919) (700)
Other Liabilities (430,194) 18,031
------------ -------------
Net Cash Used by Operating Activities $ (724,797) $ (63,347)
------------ -------------
Cash Flows Used in Investing Activities:
Acquisitions of Property and Equipment $ (234,186) $ (9,468)
------------ -------------
Cash Flows From Financing Activities:
Proceeds From Issuance of Capital Stock $ 769,502 $ 78,502
Proceeds From Issuance of Notes Payable 160,715 0
------------ -------------
Net Increase in Financing Activities $ 930,217 $ 78,502
------------ -------------
Net Increase/(Decrease) in Cash and Cash Equivalents $ (28,766) $ 5,687
Cash and Cash Equivalents - Beginning of Period 31,363 0
------------ -------------
Cash and Cash Equivalents - End of Period $ 2,597 $ 5,687
============ =============
Supplemental Disclosure of Cash Flow Information:
Cash Paid For Interest $ 5,319 $ 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 June 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 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 7,721,695 for the period ended June
30, 2000.
(2) Property and Equipment
At June 30, 2000, property and equipment consists of the
following:
Computer Software $ 37,406
Computer Equipment 64,912
Furniture & Fixtures 102,626
Equipment 30,166
Costumes 5,750
Learning Materials 29,993
------------
Total Property and Equipment $ 270,852
Less Accumulated Depreciation 21,678
------------
Net Property and Equipment $ 249,174
============
<PAGE> 8
(3) Intangible Assets
At June 30, 2000, intangible assets consists of the
following:
Writer's Consent $ 245
Literary Properties 15,000
Intellectual Properties 384,108
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Total Other Assets $ 399,353
Less Accumulated Amortization 40,154
-----------
Net Other Assets $ 359,199
===========
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 June 30, 2000,
the Company had issued 8,541,852 shares of common stock.
(5) Income Tax
The Company has no provision for taxes as it has a net
operating loss of approximately $890,388 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 June 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 the past year, 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
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.
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
<PAGE> 10
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 June 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
June 30, 2000.
Item 5. Defaults Upon Senior Securities
No defaults upon senior securities occurred during the
quarter ended June 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 June 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
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Stanfield Educational Alternatives, Inc.
By /s/ Lawrence W. Stanfield
----------------------------------------------
Lawrence W. Stanfield, Chief Executive Officer
Date: August 4, 2000
<PAGE> 12
