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 March 31, 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. [ ]
The issuer is a developmental stage company, and as such has yet to
generate any revenues.
As of April 19, 2000, the issuer had 7,680,002 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
March 31, 2000
Page
----
PART I: Financial Information . . . . . . . . . . . . . . . . . 3
Item 1. Financial Statements. . . . . . . . . . . . . . . . . . 3
Condensed Balance Sheet (Unaudited) . . . . . . . . . . 3
Condensed Statement of Operations (Unaudited) . . . . . 4
Condensed Statements of Cash Flows (Unaudited). . . . . 5
Notes to Financial Statements . . . . . . . . . . . . . 6
Item 2. Management's Discussion and Analysis or
Plan of Operation . . . . . . . . . . . . . . . . . . . 9
PART II: Other Information . . . . . . . . . . . . . . . . . . . 10
Item 3. Legal Proceedings . . . . . . . . . . . . . . . . . . . 10
Item 4. Change in Securities. . . . . . . . . . . . . . . . . . 10
Item 5. Defaults Upon Senior Securities . . . . . . . . . . . . 11
Item 6. Submission of Matters to a Vote of Security Holders . . 11
Item 7. Other Information . . . . . . . . . . . . . . . . . . . 11
Item 8. Exhibits and Reports on Form 8-K. . . . . . . . . . . . 11
SIGNATURES. . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
<PAGE> 2
PART I. - FINANCIAL INFORMATION
-------------------------------
Item 1. Financial Statements
STANFIELD EDUCATIONAL ALTERNATIVES, INC.
(a development stage company)
CONDENSED BALANCE SHEET
(Unaudited)
March 31, 2000
--------------
ASSETS:
Current Assets:
Cash $ 6,262
Other Current Assets 4,161
--------------
Total Current Assets $ 10,423
Property and Equipment (net) 117,085
Intangible Assets (net) 379,166
--------------
Total Assets $ 506,674
--------------
LIABILITIES & STOCKHOLDER'S EQUITY:
Current Liabilities:
Due to Related Parties $ 425,266
Other Current Liabilities 77,056
--------------
Total Current Liabilities $ 502,322
--------------
Stockholder's Equity:
Common Stock $ 426,484
Accumulated Deficit (419,132)
--------------
Total Stockholder's Equity $ 4,352
--------------
Total Liabilities and Stockholder's Equity $ 506,674
--------------
See accompanying notes.
<PAGE> 3
STANFIELD EDUCATIONAL ALTERNATIVES, INC.
(a development stage company)
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Cumulative for
the period from
March 23, 1999
(inception) thru
March 31, 2000 March 31, 2000
-------------- ----------------
<C> <C> <C>
Operating Expenses $ 184,142 $ 416,506
Other Expenses:
Interest Expense 1,022 2,626
-------------- ----------------
Net Loss $ 185,164 $ 419,132
-------------- ----------------
Basic EPS:
Net Loss Per Common Share $ 0.026
--------------
</TABLE>
See accompanying notes.
<PAGE> 4
STANFIELD EDUCATIONAL ALTERNATIVES, INC.
(a development stage company)
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Cumulative for
the period from
March 23, 1999
(inception) thru
March 31, 2000 March 31, 2000
-------------- ----------------
<C> <C> <C>
Cash Flows From Operating Activities:
Net Loss $ (185,164) $ (419,132)
Adjustments to Reconcile Net Loss to Net Cash
Used by Operating Activities:
Depreciation and Amortization 25,529 26,625
Increase/(Decrease) in cash caused by changes in:
Other Current Assets (2,488) (4,161)
Other Current Liabilities (3,204) 77,056
------------- --------------
Net Cash Used by Operating Activities $ (165,327) $ (319,612)
------------- --------------
Cash Flows Used in Investing Activities:
Acquisitions of Property and Equipment $ (40,224) $ (123,523)
------------- --------------
Cash Flows From Financing Activities:
Proceeds From Issuance of Capital Stock $ 180,450 $ 423,484
Proceeds From Issuance of Notes Payable 0 25,913
------------- --------------
Net Increase in Financing Activities $ 180,450 $ 449,397
------------- --------------
Net Increase/(Decrease) in Cash and Cash Equivalents $ (25,101) $ 6,262
Cash and Cash Equivalents - Beginning of Period 31,363 -
------------- --------------
Cash and Cash Equivalents - End of Period $ 6,262 $ 6,262
------------- --------------
Supplemental Disclosure of Cash Flow Information:
Cash Paid For Interest $ 1,022 $ 1,612
------------- --------------
Non-cash Activity:
Purchase of Assets From Related Parties $ 0 $ 399,353
------------- --------------
</TABLE>
See accompanying notes.
<PAGE> 5
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 March 31, 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> 6
(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 7,266,007 for the period ended March 31,
2000.
(2) Property and Equipment
At March 31, 2000, property and equipment consist of the following:
Computer Software $ 37,406
Computer Equipment 32,988
Furniture & Fixtures 33,476
Equipment 19,653
------------
Total Property and Equipment $ 123,523
Less Accumulated Depreciation 6,438
------------
Net Property and Equipment $ 117,085
------------
<PAGE> 7
(3) Intangible Assets
At March 31, 2000, intangible assets consist of the following:
Writer's Consent $ 245
Literary Properties 15,000
Intellectual Properties 384,108
--------------
Total Other Assets $ 399,353
Less Accumulated Amortization 20,187
--------------
Net Other Assets $ 379,166
--------------
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 March 31, 2000, the Company had issued
7,688,502 shares of common stock.
(5) Income Tax
The Company has no provision for taxes as they have a net
operating loss of approximately $419,132 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.
(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.
<PAGE> 8
The Company opened its first corporate Ed-vancement center on
April 24th, 2000, and plans to open two additional centers in the
fall of 2000. However, as of March 31, 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.
(10) Subsequent Events
Subsequent to March 31, 2000, Innovative Technology Systems, Inc.
changed its name to Stanfield Educational Alternatives, Inc.
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 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 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
<PAGE> 9
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.
PART II - OTHER INFORMATION
---------------------------
Item 3. Legal Proceedings
As of March 31, 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 March
31, 2000.
<PAGE> 10
Item 5. Defaults Upon Senior Securities
No defaults upon senior securities occurred during the quarter
ended March 31, 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 March 31, 2000.
Item 7. Other Information
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 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
March 31, 2000.
SIGNATURES
----------
Stanfield Educational Alternatives, Inc.
By:/s/ Lawrence W. Stanfield
- - - - - - - - - - - - - - - - - - - - - - -
Lawrence W. Stanfield, Chief Executive Officer
Date: April 25, 2000
<PAGE> 11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrant's Financial Statements for the Quarter ended March 31, 2000 and is
qualified in its entirety by reference to such Financial Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 6,262
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,423
<PP&E> 123,523
<DEPRECIATION> 6,438
<TOTAL-ASSETS> 506,674
<CURRENT-LIABILITIES> 502,322
<BONDS> 0
0
0
<COMMON> 423,484
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 506,674
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 184,142
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,022
<INCOME-PRETAX> (185,164)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (185,164)
<EPS-BASIC> (0.026)
<EPS-DILUTED> (0.026)
</TABLE>
