UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Fiscal Year Ended September 30, 1996
Commission file Number 0-14411
Instructivision, Inc.
- -------------------------------------------------------
(Exact name of registrant as specified in its charter)
New Jersey 22-2386359
- ------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3 Regent Street, Livingston, NJ 07039
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code:
(201) 992 9081
Securities registered pursuant to Section 12(b) of the ACT:
Title of each Class: Name of each exchange on which registered:
- -------------------- ------------------------------------------
Common Stock none
Securities registered pursuant to Section 12(b) of the ACT:
Common Stock $0.001 par value
- -----------------------------
(Title of Class)
<PAGE>
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES [X] NO [ ]
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of regulation S-K is not contained herein, and
will not be contained, to the best of the registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
YES [X] NO [ ]
The aggregate market value of the voting stock held by non-
affiliates of the Company as of December 30, 1996, was $418,750
based on the over-the-counter closing bid price of $.125 per share on
December 30, 1996.
The number of shares of Common Stock, .001 par value, of the
Company, issued and outstanding as of December 30, 1996 was
3,350,000.
<PAGE>
PART I
ITEM 1. BUSINESS
- ----------------
The Company
- ------------
Instructivision, Inc. (the "Company") develops and publishes a
broad line of educational software and related workbooks, and
instructional video tapes. Educational products, which accounted for
41% of the Company's revenues, are principally sold to high schools
in the United States. Education market products include test preparation
material for college entrance and minimum basic skills for high school
graduation.
The Company currently published over 80 video titles on diverse
topics such as discipline, cultural diversity, critical thinking
skills, and learning styles.
The Company produces software and textbooks for other publishers
under royalty agreements and/or fixed fee contracts. Royalties accounted for
12% of revenues in 1996. Customers of the Company's educational programs
include the National Association of Secondary School Principals (NASSP),
the National Association of Elementary School Principals (NAESP),
Educational Testing Service, and Steck-Vaughn Company.
The Company owns a video production studio and two post-production
digital editing suites in which it creates video programs for schools and
industry. Corporate customers utilize the Company's video services to
create employee training videos, medical information, product introductions
and infomercials. The Company specializes in creative services, script
writing, on-location and in-studio taping, teleconferencing, audio
recording, digital and analog editing, graphics, animation and duplication
services. Clients during the past fiscal year have included First Union
Bank, Prime Hospitality, Chanel, Exxon, US Postal Service, Resorts USA,
Merck, and others.
Background
- ----------
The Company, a New Jersey corporation, was established in
November 1981 to develop and market multi-media educational products.
The Company's catalog of school products include workbooks, computer
software, and video programs principally for the high school market.
These programs include SAT, ACT, and GED test preparation material, and
programs for New Jersey, Florida and Louisiana State high school
competency tests. The Company also provides seminars and video tapes for
teachers on topics such as school violence, truancy, cultural diversity,
and computer technology.
The Company's video production was started in 1986 to produce
instructional video tapes for its own distribution and to serve the
corporate and advertising community in central New Jersey. Corporate
video production sales now account for approximately 40% of the Company's
revenues.
<PAGE>
Current Activities
- ------------------
1. Commercial video production
The Company's video production facility is being marketed to
the business community in the area: local merchants, advertising
agencies, independent producers, human resource organizations and health
care providers.
The Company's full service video production facility consists of a
studio, two broadcast quality editing suites, two VHS editing suites,
computerized 3-D animation stand, remote location camera package and
duplicating equipment. Revenues attributable to the Company's video
production activities for the fiscal year ended September 30, 1996,
were approximately $450,000.
2. Educational video tapes, software and workbooks:
The principal source of revenues from educational products during
the fiscal year ended September 30, 1996 were as follows:
MASTERING THE GED, a new software package, was completed in April
1996. Priced at less than $1,000, the product is being marketed to adult
education facilities and libraries.
HSPT and EWT SUCCESS consists of a series of software, textbooks and
video tapes exclusively marketed to the New Jersey middle and high
school market. These products account for approximately 15% of the
Company's sales.
SAT and ACT software and video products are sold nationally by the
Company through local sales representatives, direct mail catalog sales
and distributors.
HSCT SUCCESS, software and textbooks, completed in October 1995, was
designed to prepare students for the Florida minimum basic skills tests.
These products are being distributed through Southern Media Systems, a
marketing group based in Florida. Revenues from the sale of this product
were approximately 7% of the Company's gross sales for the fiscal year
ended September 30, 1996.
The INSERVICE VIDEO NETWORK, a collection of instructional tapes
for middle and high school educators, is produced under a collaborative
agreement with the NASSP. The Company's agreement with the NASSP
requires it to pay royalties of 15% on annual net sales of the
product (gross sales less returns and royalties paid to the authors).
The Company has published over 80 video tapes since 1986. The authors
of the individual tapes receive a 5% to 12% royalties from the
sales of their respective tapes.
The VIDEO WORKSHOP is the trade name under which the Company
produces and markets teacher training tapes for elementary school
educators under an agreement with NAESP. The Company has produced
18 tapes in the series since 1992. The NAESP receives a 15% to 20%
royalty from the net sales of such tapes. The authors of the
individual tapes receive a 6% to 12% royalty from the net sale of
their respective tapes.
<PAGE>
The Company has produced a video tape program entitled THE
FROG: INSIDE-OUT, a two part 90 minute program which is being
marketed by the Company. The Company has a non-exclusive
distributor agreement with United Learning Company to sell the
video tapes. The Company has an exclusive distributor agreement
with Optical Data Corp. to publish the product on video disk.
The Company receives a royalty of 10% from the sale of the
program on video disk.
In 1993 the Company produced an eighteen lesson video course
for students entitled SAT EDGE. The program is jointly owned by
NASSP and the Company who share equally in the revenues from the
program.
STUDY SKILLS FOR SUCCESS: A software program available for Apple,
MS-DOS, and Macintosh computers, for students grades 8 through 12.
The Company's other workbooks for improving basic math skills
are: SRA IMPLEMENTATION KIT IN MATHEMATICS, KEY IT IN I and KEY
IT IN II.
The Company is obligated to pay royalties to authors of some of
the Company's products. Such royalties payable range from 5% to 10%.
The Company's software is available for Apple, Macintosh,
MS-DOS and Windows formats. Site licenses and networking rights give
a school license to duplicate and network the program. The Company
updates its various software products from time to time to be
compatible with software currently available in the marketplace.
c) Other Revenues
- -----------------
The Company receives a royalty of 1.5 to 3% from Steck-Vaughn
Company as author of components of TEST BEST, a workbook series
published since 1991. Revenues from the product during the fiscal
year ended September 30 1996 were approximately $86,000.
SAT-1 EXCELLERATOR, ACT TEST EXCELLERATOR, and IMPROVING COLLEGE
ADMISSION SCORES ON THE ACT: The Company receives a royalty of 15%
on workbooks and 20% to 33% on software sold by the NASSP. The Company
also has a license to sell the programs. The NASSP receives a royalty
of 15% to 20% from the sale of the programs by the Company.
WORKLINK: The Company developed a software program for Educational
Testing Service which provides a database of students' records to link
schools with prospective employers. The Company receives a 5% royalty
from the sale of the program and related material.
KNOWLEDGE NAVIGATORS. The Company offers consulting services on a
variety of topics to schools for seminars and in-house training of
teachers and administrators.
<PAGE>
New Product Development
- -----------------------
The Company does not separately account for research and development
costs but estimates that on average such costs are not a material
portion of cost of sales.
The Company's new projects under development are:
LEAP Success, a test preparation software package for students taking
the Louisiana basic skills test.
In 1997 the Company intends to add a new program to its successful
HSPT series. A PRE-HSPT in Math, Reading and Writing is scheduled to be
produced to service 9th and 10th grade high school students prepare
for the HSPT.
The Company is developing a CD ROM version of the SAT EDGE program
for students preparing for the SAT. The product is scheduled to be
completed by summer 1997.
New video titles to be produced for sale under the INSERVICE VIDEO
WORKSHOP label: The Company has plans to produce three new video tapes
to be completed in fiscal 1997.
Future Plans
- ------------
The Company intends to continue expanding its product lines, and to
update existing software in step with new technological developments.
The Company's video production facility offers competitive rates
and is easily accessible to the central New Jersey business community.
The Company has added a full-time sales manager to its staff to better
compete in the advertising market of the region.
Marketing
- ---------
The Company has collaborated with the NASSP in the development
of various programs and, as a result, has transferred several of the
programs it has created to the NASSP for direct marketing to schools
throughout the country. The NASSP, of which Dr. Thomas Koerner, a
director of the Company, is Associate Executive Director, accounted for
approximately 8% of the Company's sales during the fiscal year ended
September 30, 1996 (see Item 13 hereof).
The Company has also produced educational software under contract
to other commercial publishers for fixed fees and/or advances against
royalties, and royalties. The Company has retained the broadcast and
cable television rights to the video tapes it has produced.
<PAGE>
The Company is marketing its educational and cultural video
programs to educational institutions and publishers. The Company has
granted Southern Media Systems exclusive marketing rights to the sale
of HSCT, SAT, and ACT programs in the State of Florida.
The Company has agreements with the NASSP to share in the
marketing of several of its educational programs. The Company receives
a royalty of 15% to 50% from the sale of the programs. The NASSP
receives a royalty of 15% to 50% from the Company's sale of those programs.
The Company employs three full-time commission salespersons in New
Jersey. The Company has agreements with independent sales representatives
in Florida, Louisiana, Pennsylvania, Delaware, Maryland and the District
of Columbia to sell its education products in those territories. The
Company also markets its products through mail-order distributors
throughout the United States. The Company pays commissions of 5% to
50% to sales representatives and distributors on the sale of the
Company's products.
While a significant portion of the Company's sales is made to
schools, the Company does not generally enter into long-term
contracts with such customers, but instead sells pursuant to specific
orders with a short delivery schedule, or under a price quotation
valid for no more than one year. Therefore, a material portion of the
Company's business is not subject to renegotiation of profits or
termination of contracts at the election of the government.
Seasonality of the Business
- ---------------------------
Approximately 50% of the Company's educational product sales are
realized during the fourth quarter of its fiscal year, when school
districts make their purchasing decision for the following academic year.
Approximately 40% of the Company's sales are made to schools. However,
revenues from video production services have in the past not been
significantly affected by season, thereby providing year-round cash flow
for the Company.
Employees
- ---------
The Company had 8 full-time employees at September 30, 1996.
The Company employs writers, freelance production crews and other
support personnel as needed to assist in development of educational
programs and its video production services. Contracts for services
of outside contractors are normally on a fee basis; however, some
may receive a percentage of revenues as a royalty from the Company for
their program participation. This practice has allowed the Company
to draw on part-time technical personnel and writers, while main-
taining low overhead and employment costs. The Company anticipates
maintaining this employment approach in the next fiscal year.
Copyrights and Trademarks
- -------------------------
The Company has applied for copyrights for certain of its programs
and software documentation related to these programs. However the
granting of copyright protection cannot prevent the unauthorized copying
<PAGE>
of the Company's products. Where applicable, the Company utilizes non-
disclosure and confidentiality agreements and other contractual
arrangements with customers, consultants, employees and others. While
the enforceability of such agreements cannot be assured, the Company
believes that they provide a deterrent to the use of information which
may be proprietary to the Company, and in the event of any breach of
such agreements, the Company intends to take appropriate legal action.
There can be no assurance that competitors with substantially greater
financial resources will not develop similar products outside the
protection of any copyright that may be granted to the Company.
Management believes that the competitive position of the Company depends
primarily on the creative ability and technical competence of its
personnel and that its business will not be materially dependent
on copyright protection.
The Company markets a portion of its products under the Company's
name of Instructivision. The Company has been denied trademark
protection by the U.S. Patent and Trademark Office for this name because,
in the view of the examiners, the Company's name is not easily
distinguishable from a registered trademark belonging to a Canadian firm.
The Company does not believe that the absence of trademark protection
for its name will cause any marketing difficulties for its products.
Nevertheless, the Company cannot rule out the possibility of having the
use of its name challenged and/or having to change its name. The Company
may not have the resources to successfully defend an infringement action.
Should the Company be required to change its name or adopt another name
for marketing purposes, the cost of such change or adoption is presently
undeterminable.
The Company markets some of its video programs under the trade
name INSERVICE VIDEO NETWORK, VIDEO WORKSHOP and KNOWLEDGE NAVIGATORS.
Backlog
- -------
The Company's sales backlog at September 30, 1996 consisted of
contractual video production obligations to be filled over the next 90
days of approximately $80,000. Orders for existing computer software
and books are currently processed and shipped within 3 to 15 days.
Competition
- -----------
Several of the Company's competitors have greater financial
resources, more extensive business experience and greater software
and video program production development, manufacturing, marketing,
and servicing capabilities than the Company. There already is a large
number of software programs directed at preparing students for test
taking on the market.
The Company also competes with other video production companies
producing commercials and instructional video programs. The Company
plans to continue competing in the multimedia educational market on
the basis of its previous experience in developing test preparation
software and video tapes and on its management's experience as
professional educators, attuned to the needs of the education sector.
<PAGE>
ITEM 2. Property
- ----------------
The Company's executive facilities, teleproduction studio and
software production facilities are housed in approximately
7,300 sq.ft. of leased office space at 3 Regent Street, Livingston,
New Jersey. The monthly rental as of September 30, 1996 was
$9,133.75. The lease will expire on June 30, 2001. Under the lease,
the Company is responsible for insurance, maintenance, taxes and
other costs of occupancy. The Company believes that the space will
meet its needs for the foreseeable future and would accommodate a
significant increase in production of educational products and video
services.
ITEM 3. Legal Proceedings
- -------------------------
none
ITEM 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
none
PART II
-------
ITEM 5. Market for the Company's Common Equity and Related
Shareholder Matters.
- -----------------------------------------------------------
The Company's Common Stock has been traded on a limited and
sporadic basis in the over-the-counter market. The following table
sets forth for the Company's fiscal periods indicated the high and
low bid quotation in the over-the-counter market for the Company's
Common Stock. Quotations represent inter-dealer quotations without
adjustment for retail mark-ups, mark-downs or commissions and may
not necessarily represent actual transactions.
Period Common Stock
High Low
- ------- ---- ---
<TABLE>
<S> <C> <C>
1/1/95 - 3/31/95 3/8 1/4
4/1/95 - 6/30/95 3/8 1/4
7/1/95 - 9/30/95 3/8 1/4
10/1/95 - 12/30/95 3/8 1/4
1/1/96 - 3/31/96 1/4 1/8
4/1/96 - 6/30/96 1/4 1/8
7/1/96 - 9/30/96 1/4 1/8
10/1/96 - 12/30/96 1/4 1/8
</TABLE>
At December , 1996 management believes that the approximate
number of holders of the Company's Common Stock was 280. This number
is based upon the Company's stockholder mailing list and information
<PAGE>
provided to the Company by investors. At December 30, 1996 the
Company's transfer agent advised that there were 202 holders of
record of the Company's Common Stock. The Company has not paid any
cash dividends on its Common Stock and does not anticipate paying
dividends in the foreseeable future. As of March 1, 1992 the
Company's stock is no longer traded on the NASDQ system.
ITEM 6. Selected Financial Data
- -------------------------------
The selected financial data presented below are derived from the
Company's financial statements. The financial statements as of and for
the five years ended September 30, 1996 have been examined by Stanley
Morin and Associates, independent certified public accountants. Their
audit report on such financial statements as of September 30, 1996 and
1995 and for the three years ended September 30, 1996 is included
elsewhere in this Form 10-K. This data should be read in conjunction
with the financial statements and notes thereto appearing elsewhere
herein. The Company has never paid cash dividends.
Summary of Balance Sheets
- -------------------------
<TABLE>
<CAPTION>
September 30,
1996 1995 1994 1993 1992
---------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Current assets $1,599,313 $ 762,489 $ 808,172 $ 668,016 $ 606,986
Current liabilities 272,793 271,598 247,732 199,220 194,790
Working capital 1,326,520 490,891 560,440 468,796 412,196
Total Assets 2,185,990 1,411,159 1,285,242 962,112 935,014
Total liabilities 314,151 358,080 251,065 199,220 225,979
Stockholder's
equity 1,871,839 1,053,079 1,034,177 762,892 709,035
Net tangible book
value per share .48 .23 .24 .20 .18
Shares used in per
share calculation 3,350,000 3,350,000 3,350,000 3,350,000 3,350,000
<CAPTION>
Summary Statement of Operations
- -------------------------------
1996 1995 1994 1993 1992
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues $1,138,171 $1,224,282 $1,253,011 $1,197,806 $1,263,773
Cost of sales 751,974 698,958 648,822 690,440 700,177
Gen.admin.expenses 477,610 485,324 456,983 449,954 458,320
Income (loss) before
extraord item and cum.
effect of accounting
change (110,240) 18,902 83,285 53,857 100,186
Extraordinary item 938,000 -- -- -- --
Cum.effect of change
in accounting -- -- 188,000 -- --
Net income (loss) 818,760 18,902 271,285 53,857 100,186
Earnings (loss) per
share before extra-
ord.items & cumulative
effect of acctg.change (.03) .01 .02 .01 .02
Earnings(loss) per share .24 .01 .08 .02 .03
Shares used in per
share calculations 3,350,000 3,350,000 3,350,000 3,350,000 3,350,000
</TABLE>
<PAGE>
ITEM 7. Management's Discussion and Analysis of Financial Condition
and Results of Operation.
- -------------------------------------------------------------------
On August 2, 1996, the Company's founder and CEO, Jay Comras, died.
In September, the Board of Directors unanimously elected Rosemary Comras
as Company president. Ms. Comras previously served as Vice President and
Controller of the Company.
For the fiscal year ended September 30, 1996, the Company's net
sales were $1,138,171 compared to $1,224,282 for 1995 and $1,253,011
in 1994. Revenues declined 7% over the previous year. Loss of income
from consulting activities by the Company's former CEO, Jay Comras affected
sales. Mr. Comras had been active in the marketing of the Company's
products and providing consulting services for fees to educational
organizations until his illness in February. The Company has commenced
a major reorganizing effort to expand its network of sales re-
presentatives in New Jersey and other states. Advertisements in national
trade publications and direct catalog mailings to schools throughout the
country are expected to boost sales in the coming fiscal year.
Revenues from video production services have decreased from $577,451
in 1995 to $451,560 in 1996 due primarily to loss of business from one
video customer. Revenues from video production activities accounted for 44%
of the Company's revenues in 1996. In 1995 video revenues were 53% of total
sales, up from 45% in 1994.
Sales of educational products showed a slight increase over the
previous fiscal year, due to the Company's marketing activities in Florida.
In October 1995, the Company introduced new high school competency
software and workbook to prepare high school students for the State
mandated basic skills test.
The Company received a payment of $1,000,000 of life insurance proceeds
upon the death of Jay Comras. The funds were held in an interest bearing
account on September 30, 1996.
The Company reduced its inventory in fiscal 1996 by 30% from 1995.
Inventory consisted principally of textbooks and video tapes held for
sale. Over the same period capitalized software increased from $114,804 to
$196,528 due to completion of the Company's new products Mastering the
GED software and the HSCT Series for the Florida school market.
The Company experienced an increase of cost of goods of 7% or $53,000
in fiscal 1996 over the prior year on lower revenues. Higher maintenance
costs and depreciation expenses in connection with the video and computer
equipment impacted on the Company's operating costs.
The Company reported a net loss of 10% from operations before extra-
ordinary items for the year ended September 30, 1996, compared to a net
gain of 2% in 1995 and a net gain of 12% in 1994.
<PAGE>
The Company experienced no significant change in the level of
accounts receivables and accounts payables at fiscal year end compared
to the previous two years. Accounts receivables were $296,728, $316,759
and $338,892 respectively for fiscal years ending September 1996, 1995
and 1994.
At September 30, 1996, the Company had working capital in the
amount of $1,342,113, principally as a result of receipt of insurance
proceeds on the life of Jay Comras in the amount of $1,000,000.
Management believes the Company has sufficient funds to meet its
operating requirements for the comming year.
ITEM 8. Financial Statements and Supplementary Data
- ----------------------------------------------------
See attached Financial Statements.
ITEM 9. Disagreements on Accounting and Financial Disclosure
- ------------------------------------------------------------
None
PART III
--------
ITEM 10. Directors and Executive Officers of Registrant
- -------------------------------------------------------
The executive officers and directors of the Company, and further
information concerning them, are as follows:
[S] [C] [C]
Rosemary Comras 56 President, Secretary/Treasurer and
Director
Thomas Koerner 65 Director
Marcus Ruger 65 Director
David Sousa 56 Director
Rosemary Comras was elected President of the Company on September 4,
1996 following the death of Jay Comras, the founder, Chairman of the Board,
President and Chief Executive Officer of the Company. Ms. Comras had been
Vice President, Secretary/Treasurer and a director of the Company since
its inception. Ms. Comras is the widow of Jay Comras.
Dr. Thomas F. Koerner has been a director of the Company since
March 1985. Dr. Koerner has been Associate Executive Director for
the NASSP since 1971. Dr. Koerner will continue to devote only as
much time to the affairs of the Company as is necessary to carry out
his duties as a director, which is estimated to be a minimal amount
of his time.
<PAGE>
Dr. Marcus Ruger has been a director of the Company since March
1986. Dr. Ruger was employed as Director of Assessment Services for
the Mountain Plains Regional Office of American College Testing (ACT)
from 1983 until his retirement in September 1995. Dr. Ruger will continue
to devote only as much time to the affairs of the Company as is
necessary to carry out his duties as a director, which is estimated
to be a minimal amount of time.
Dr. David Sousa has been a director of the Company since April
1994. Dr. Sousa was employed as Superintendent for the New Providence
New Jersey School district from 1991 till July 1994. Dr. Sousa conducts
training seminars and consulting services to schools thoughout the
United States. Dr. Sousa will continue to devote only as much time
to the affairs of the Company as is necessary to carry out his duties
as a director, which is estimated to be a minimal amount of his time.
All of the directors of the Company were elected in 1996 to serve
until the next annual meeting of the stockholders and until their
successors have been elected and have qualified. Officers are appointed
to serve until the meeting of the Board of Directors following the next
annual meeting of stockholders and until their successors have been
elected and have qualified.
ITEM 11. Executive Compensation
- --------------------------------
The following table sets forth information concerning the com-
pensation paid to Jay Comras, the Company's Chairman of the Board,
President, and Chief Executive Officer, during each of the last three
fiscal years. There are no excecutive officers of the Company for whom
total annual salary and bonus exceeds $100,000.
<TABLE>
<CAPTION>
Annual Compensation
Fiscal Salary Bonus Other All Other
year Compensation(1) Compensation(2)
- ------------- ------ --------- ------- ------------- ---------------
<S> <C> <C> <C> <C> <C>
Jay Comras, 1994 $73,533 $ --- $ 500 $ 10,880
Chairman of the 1995 77,825 --- 500 11,700
Board, President 1996(3) 45,000 4,850 300 6,500
and CEO
</TABLE>
(1) Compensation consisted of personal use of a Company-owned automobile
(2) Compensation consisted of premiums paid on a life insurance policy
covering Mr. Comras, the proceeds of which were payable to beneficiaries
designated by him.
(3) Compensation through Aug 2,1996
The Company has a three year employment agreement with Rosemary
Comras, President and Secretary/Treasurer of the Company, which
commenced September 1, 1996, for an annual salary of $75,000, which
increases to $78,500 on September 1, 1997, and $83,000 on September 1,
1998 . In addition Ms. Comras receives a bonus of 2.5% of the
Company's net profit before taxes.
<PAGE>
The Company may, in the future, offer disability insurance,
reimbursement of medical expenses and such other benefits as may be
authorized by the Board of Directors. Presently, all full-time employees
are eligible to receive Company paid health and dental insurance
premiums. No retirement, pension, profit sharing, or other similar
program has been adopted by the Company. No surviving warrants or stock
options have been granted to any officer, director or other employee of
the Company. However, such benefits may be adopted or options granted in
the future, if they are authorized by the Board of Directors.
Key Man Insurance
- -----------------
The Company obtained a "key man" term life insurance policy on the
life of Jay Comras, Chairman of the Board, President and Chief
Executive Officer of the Company, in the amount of $1,000,000. Upon his
death on August 2, 1996 the proceeds were paid to the Company.
Compensation Committee Interlocks and Insider Participation
- -----------------------------------------------------------
As directors of the Company, Jay Comras and Rosemary Comras
participated in deliberations of the Board of Directors concerning
executive officer compensation. The Board of Directors has no
compensation committee or other committee performing equivalent
functions.
Dr. Thomas Koerner is a director of the Company. Dr. Koerner is
also Associate Executive Director of the NASSP, a customer of the
Company. During the fiscal years ended September 30, 1996 and 1995, the
Company derived revenues of approximately $95,000 and $100,000,
respectively, from sales and consulting services to the NASSP.
Compensation of Directors
- -------------------------
Outside directors receive $250 for each board meeting attended
and are reimbursed for the reasonable out-of-pocket expenses incurred
by them in connection with the performance of their services as
directors.
ITEM 12. Security ownership of certain beneficial owners and Management
- ------------------------------------------------------------------------
The following table sets forth certain information regarding the
beneficial ownership of the Company's Common Stock as of the date hereof
by (i) each person who is known by the Company to own beneficially more
than 5% of the Company's outstanding Common Stock; (ii) each of the
Company's officers and directors; and (iii) officers and directors of the
Company as a group:
<PAGE>
<TABLE>
Name and address of Amount and Nature of Percentage of
Beneficial Owner Beneficial Ownership Ownership
- ------------------- -------------------- -------------
<S> <C> <C>
Rosemary Comras 1,100,000 33%
14 Tilden Drive
East Hanover NJ
Rosemary Comras 975,000 29%
ITF Kevin Comras and
Joann Doniloski
Thomas F. Koerner --- --
Tumbletree Way
Reston VA
Marcus C. Ruger --- --
3131 South Vaughn Way
Aurora CO
David Sousa 6,000 --
729 Belvidere Avenue
Plainfield NJ
- --------------------------------------------------------------
All officers and directors
as a group (5 persons) 2,081,000 62%
</TABLE>
ITEM 13. Certain relationships and related transactions
- -------------------------------------------------------
Dr. Thomas Koerner is a director of the Company. Dr. Koerner is
also Associate Executive Director of the NASSP, a customer of the
Company. During the fiscal years ended September 30, 1996 and 1995 the
Company derived revenues of approximately $95,000 and $100,000,
respectively, from sales and consulting services to the NASSP.
Possible conflict of interest
- -----------------------------
Any conflict of interest between the Company and the personal
interests of its officers and directors will be resolved to the best
ability and in the best judgment of the officers and directors of the
Company, in a manner which protects the interest of the Company. The
officers and directors of the Company have agreed to present any
opportunities to the Company first, when possible, for review and
evaluation by the other directors of the Company.
If the Company enters into transactions in the future with any of
its officers and/or directors or companies affiliated with them, the
terms of such transactions will be as favorable to the Company as those
which could be obtained from an unrelated party in the arms-length
transaction.
<PAGE>
ITEM 14. Exhibits, Financial Statements, Schedules and Reports on
Form 10-K
- -----------------------------------------------------------------
(a) 1. Financial Statements
2. Schedules
(b) Reports on Form 8-K
none
(c) Exhibits required by Item 601(b) of Regulation 5-K:
1.1 Form of Common Stock(A)
1.2 Form of Warrant Agreement (B)
1.2A Amendment No. 1 to Warrant Agreement with Amended Warrant
annexed. (D)
1.2B Amendment No. 2 to Warrant Agreement with Amended Warrant
annexed (H)
1.2C Amendment No. 3 to Warrant Agreement with Amended Warrant
annexed (J)
1.2D Amendment No. 4 to Warrant Agreement with Amended Warrant
annexed (K)
1.2E Amendment No. 5 to Warrant Agreement with Amended Warrant
annexed (L)
1.3 Form of Sellling Agreement (B)
1.4 Form of Agreement among Underwriters (B)
1.5. Form of Represantive's Stock Purchase Options (B)
1.6 Selling Security Holder's Options (H)
3.1 Certificate of Incorporation of the Registrant (A)
3.2 Certificate of Amendment to the Certificate of Incorporation (A)
3.3 Certificate of change to the Certificate of Incorporation (A)
3.4 By-Laws of the Registrant (A)
10.2 Contract of Employment with Rosemary Comras (A)
10.2a Renewal of Employment Contract with Rosemary Comras (O)
10.3 Memorandum of Agreement with the NASSP (A)
10.4 Memorandum of Agreement with the NASSP and CBS Software (A)
10.5 Memorandum of Agrement with the NASSP (Achievment Tests (A)
10.6 Agreement with Research for Better Schools (A)
10.7 Memorandum of Agreement with the NASSP (ACT Preparation
Program (A)
10.8 Agreement with Peterson's Guides Inc. (A)
10.9 Agreement with Hayden Software (A)
10.10 Assignment of income from Jay Comras to Instructivision (B)
10.11 intentionally omitted
10.12 intentionally omitted
10.13 Loan Document with Howard Savings Bank (D)
10.14 Letter Agreement (April 2, 1986 with NASSP (D)
10.15 Agreement with Research for Better Schools dated April 1986 (D)
10.16 Lease for 3 Regent Street, Livingston NJ (F)
10.16a Amendment to Lease (G)
10.16b Amendment No. 2 to Lease (O)
10.17 Release from Hayden Software Company (F)
10.18 intentionally omitted
10.19 intentionally omitted
10.20 Loan Agreement with Principal stockholder (J)
10.21 Agreement with NASSP for Inservice Video Network (K)
10.22 Agreement with NASSP (ACT preparation Programs (M)
<PAGE>
(A) Incorporated by reference, filed with the initial filing of
the Company's Registration Statements, File No. 2-98176-NY on
or about June 4, 1985
(B) Incorporated by reference, filed with Pre-Effective Amendment
No. 2 of the Company's Registration Statement, File No.
2-98176-NY on or about July 18 1985
(C) Incorporated by Reference, filed with form 8-K, dated
August 12, 1986
(D) Filed with Post-Effective Amendment No. 1 to the Company's
Registration Statement, File No. 2-98176-NY on October 1, 1986
(E) Incorporated by Reference, filed with Form 8-K, dated August
12, 1986
(F) Filed with Post-Effective Amendment No. 1 on October 1, 1986
(G) Incorporated by Reference, filed with Form 10-K on January 13,
1987
(H) Filed with Post-Effective Amendment No. 3 on March 9, 1987
(I) Filed with Post-Effective Amendment No. 4 on July 13, 1987
(J) Filed with 10-K on January 8, 1988
(K) Filed with Post-Effective Amendment No. 6 on April 1, 1988
(L) Filed with Post-Effective amendment No. 7 on July 12, 1988
(M) Filed with Form 10-K on December 29, 1988
(N) Filed with Form 10-K on December 29, 1990
(O) Filed with Form 10-K on December 28, 1994
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Instructivision, Inc.
We have audited the accompanying balance sheets of
Instructivision, Inc. as of September 30, 1996 and 1995, and the
related statements of operations, stockholders' equity and cash
flows for the years ended September 30, 1996, 1995, and 1994. 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 audits.
We conducted our audits 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 our audits 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
Instructivision, Inc. as of September 30, 1996 and 1995, and the
results of its operations and its cash flows for the years ended
September 30, 1996, 1995, and 1994 in conformity with generally
accepted accounting principles.
As discussed in Note 8 to the financial statements, the
Company changed its method of accounting for income taxes in 1994.
Our audits were conducted for the purpose of forming an
opinion on the basic financial statements taken as a whole. The
accompanying schedules V, VI and X are presented for purposes of
additional analysis and are not a required part of the basic
financial statements. Such information has been subjected to the
auditing procedures applied in the audit of the basic financial
statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a
whole.
STANLEY J. MORIN & ASSOCIATES
Cedar Knolls, New Jersey
December 20, 1996
<PAGE>
<TABLE>
<CAPTION>
INSTRUCTIVISION, INC
BALANCE SHEETS
September 30,1996 and 1995
1996 1995
----------- -----------
<S> <C> <C>
Current assets
Cash $1,007,906 $ 1,246
Accounts receivable - unaffiliated 235,245 263,577
Accounts receivable - affiliated 61,483 53,182
Inventory 280,078 411,918
Prepaid expenses 4,601 9,566
Deferred income taxes 10,000 23,000
----------- -----------
Total current assets 1,599,313 762,489
Property and equipment at cost, less
accumulated depreciation 300,024 425,741
Other assets
Capitalized software - net of amortization 196,528 114,804
Deposits 13,125 13,125
Deferred income taxes 77,000 95,000
----------- -----------
Total other assets 286,653 222,929
----------- -----------
Total assets $2,185,990 $1,411,159
========== ===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C> <C>
Current liabilities
Accounts payable $ 60,397 $ 83,241
Accrued expenses 121,802 94,174
Notes payable - current portion 45,594 43,633
Notes payable - shareholder 45,000 50,550
----------- -----------
Total current liabilities 272,793 271,598
Notes payable, less current portion 41,358 86,482
----------- -----------
Total liabilities 314,151 358,080
----------- -----------
Stockholder's equity
Common Stock, $.001 par value, 10,000,000
shares authorized, 3,350,000 shares
issued and outstanding 3,350 3,350
Additional paid-in capital 1,425,218 1,425,218
Accumulated earnings (deficit) 443,271 (375,489)
----------- -----------
Total stockholder's equity 1,871,839 1,053,079
----------- -----------
Total liabilities and stockholders equity $2,185,990 $1,411,159
=========== ===========
</TABLE>
[FN]
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
INSTRUCTIVISION, INC.
STATEMENT OF OPERATIONS
For each of the Three Years ended September 30, 1996
1996 1995 1994
---------- ----------- ----------
Revenues
<S> <C> <C> <C>
Net sales: Products $ 469,980 $ 459,639 $ 521,938
Services - unaffiliated 573,269 644,765 562,073
Services - affiliated 94,922 119,878 169,000
----------- ---------- ---------
Total revenues 1,138,171 1,224,282 1,253,011
Costs and expenses
Cost of sales
Products 322,334 235,263 176,163
Services - unaffiliated 353,980 389,504 363,396
Services - affiliated 75,660 74,191 109,263
----------- ---------- ---------
Total cost of sales 751,974 698,958 648,822
General and administrative expenses 477,610 485,324 456,983
Interest expenses 18,827 12,098 2,921
----------- ---------- ---------
Total costs and expenses 1,248,411 1,196,380 1,108,726
----------- ---------- ---------
Income (loss) before income taxes,
extraordinary items & cumulative
effect of change in accounting
principle (110,240) 27,902 144,285
Provision for income taxes 9,000 9,000 61,000
----------- ---------- ---------
Income (loss) before extraordinary
items and cum.effect of change
in accounting principles (119,240) 18,902 83,285
Extraordinary item - life insurance
proceeds (net of income taxes of
$62,000) 938,000 -- --
------------ ---------- ---------
Income before cumulative effect of
change in accounting principle 818,760 18,902 83,285
Cum.effect of change in accounting -- -- 188,000
------------ ---------- ---------
Net income $ 818,760 $ 18,902 $ 271,285
=========== ========== =========
Earnings per share -income before
extraordinary item and cumulative
effect of change in accounting (.04) .01 .02
Earnings per share - extraord.item .28 -- --
Earnings per share - cumulative
effect of change in accounting -- -- .06
--------- --------- ---------
Earnings per share $ .24 $ .01 $ .08
========= ========= =========
</TABLE>
[FN]
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
INSTRUCTIVISION, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Three Years Ended September 30, 1996
Common Stock Additional Accumulated Total
Shares Amount paid-in Deficit
Capital
--------- ------- ----------- ----------- ---------
Balance,
<S> <C> <C> <C> <C> <C>
Sept.30,1993 3,350,000 $3,350 $1,425,218 $(665,676) $ 762,892
Net income
for year -- -- -- 271,285 271,285
--------- ------ ---------- ---------- --------
Balance,
Sept.30,1994 3,350,000 3,350 1,425,218 (394,391) 1,034,177
Net income
for year -- -- -- 18,902 18,902
--------- ------ ---------- ---------- ---------
Balance,
Sept.30,1995 3,350,000 3,350 1,425,218 (375,489) 1,053,079
Net income
for year -- -- -- 818,760 818,760
--------- ------ ---------- ---------- ----------
Balance,
Sept.30,1996 3,350,000 $3,350 $1,425,218 $ 443,271 $1,871,839
========= ====== ========== ========== ==========
</TABLE>
[FN]
See accompanying notes to financial statements
<PAGE>
<TABLE>
<CAPTION>
INSTRUCTIVISION, INC.
STATEMENT OF CASH FLOWS
For each of the Three Years Ended September 30, 1996
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Operating activities
Net income $ 818,760 $ 18,902 $ 271,285
Adjustments to reconcile net income to
net cash provided by operatg.activities
Depreciation 132,833 112,353 76,070
Amortization of capitalized software 45,969 38,556 28,225
Deferred income taxes 31,000 9,000 61,000
Cum.effect of change in accounting princ. -- -- (188,000)
Changes in operatg.assets and liabilities:
(In)decrease in accounts receivable
- unaffiliated 28,332 (45,265) 43,733
- affiliated (8,301) 67,398 (55,337)
De(In)crease in inventory and prepaid
expenses 136,805 (23,203) (75,380)
(De)increase in accounts payable and
accrued expenses 4,784 (18,817) 43,227
(De)Increase in deferred income -- (27,000) 27,000
--------- --------- ---------
Net cash provided by operatg.activities 1,190,182 131,924 231,823
Investing Activities
Additions to capitalized software (127,693) (42,499) (60,126)
Purchases of property, plant & equipment (7,116) (116,355) (151,143)
--------- --------- ---------
Net cash utilized in investg. activities (134,809) (158,854) (211,269)
Financing activities
Proceeds from shareholder advances -- 36,050 --
Principal payment on credit lines,notes
payable and capital lease obligations (48,713) (27,272) (18,382)
--------- --------- ---------
Net cash (utilized) provided by
financing activities (48,713) 8,778 (18,382)
(De)increase in cash 1,006,660 (18,753) 2,172
Cash at beginning of year 1,246 19,999 17,827
----------- --------- ---------
Cash at end of year $1,007,906 $ 1,246 $ 19,999
=========== ========= =========
<CAPTION>
Supplemental disclosure of cash flow information:
1996 1995 1994
------- -------- --------
Cash paid during the year for
<S> <C> <C> <C>
Interest $16,808 12,098 $ 2,921
Income taxes 62 25 25
</TABLE>
[FN]
See accompanying notes to financial statements
<PAGE>
INSTRUCTIVISION, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1996
NOTE 1. Formation and Nature of Business
Instructivision, Inc. operates in the educational service industry
and produces educational software, workbooks, and video programs, and
provides video production services, primarily directed at students,
teachers, administrators and local businesses for in-house training
purposes.
NOTE 2. Summary of Significant Accounting Policies
a. Inventory
- ------------
Inventory is valued at the lower of cost, determined on a first-
in, first-out basis, or market value.
b. Property and Equipment
- -------------------------
Property and equipment is stated at cost. Expenditures for maint-
enance and repairs are charged to expenses as incurred and major
renewals and betterments are capitalized. Depreciation is provided
on the straight-line basis over the estimated useful lives of the
related assets.
c. Income Taxes
- ---------------
Effective October 1, 1993, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 109 "Accounting for
Income Taxes" which requires the liability method of accounting for
deferred income taxes. Deferred income taxes are recognized for the
effect of temporary differences between financial and tax reporting.
In addition, SFAS No. 109 requires the recognition of future tax
benefits, such as net operating loss carryforwards to the extent that
realization of such benefits are more likely than not. (See Note 8 -
Income Taxes)
d. Capitalized Software Costs
- -----------------------------
Product development includes all expenses related to future re-
leases and enhancements of the products, including research, develop-
ment, porting of software to new operating systems and platforms,
documentation, development of training programs, less allowable
capitalized software development costs.
In accordance with Statement of Financial Accounting Standards
No. 86, "Accounting for the Costs of Computer Software to be Sold,
Leased or Otherwise Marketed," the Company capitalizes the direct
costs and allocated overhead associated with the development of
software products. Initial costs are charged to operations as
research prior to the development of a detailed program design or a
working model. Costs incurred subsequent to the product release, and
research and development performed under contract are charged to
operations.
Capitalized costs are amortized over periods not exceeding five
years on the straight line basis. Unamortized costs are carried at the
lower of book value or net realizable value. Research and development
costs incurred were insignificant for the years ending September 30,
1996, 1995 and 1994 and have been expensed.
<PAGE>
INSTRUCTIVISION, INC.
NOTES TO FINANCIAL STATEMENTS--(Continued)
September 30, 1996
e. Earnings Per Share
- ---------------------
Earnings per share are based on the weighted average number of
common shares and common equivalent shares, if any, outstanding. The
weighted average number of common shares used in computing earings per
share was 3,350,000 for each of the years ended September 30, 1996,
1995, and 1994. There were no common equivalent shares outstanding
for any of those years.
f. 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
revenues and expenses during the reporting period. Actual results
could differ from these estimates.
NOTE 3. Inventory
<TABLE>
The components of inventory are as follows:
1996 1995
-------- ---------
<S> <C> <C>
Work in Process (video production cost) $ 19,783 $ 81,433
Finished Goods (video) 183,869 241,787
Finished Goods (workbooks) 76,426 88,698
-------- --------
$280,078 $411.918
======== ========
</TABLE>
NOTE 4. Property and Equipment
At September 30, 1996 and 1995 property and equipment is comprised
of the following:
<TABLE>
Life (yrs) 1996 1995
----------- ---------- ----------
<S> <C> <C> <C>
Furniture and fixtures 3 - 8 $ 34,599 $ 36,401
Video equipment and computers 3 - 10 1,262,299 1,345,827
Automobile 3 49,927 49,927
Leasehold improvements 5 - 10 109,520 109,520
---------- ----------
1,456,345 1,541,675
Less accumulated depreciation 1,156,321 1,115,934
---------- ----------
Net $ 300,024 425,741
========== ==========
</TABLE>
<PAGE>
[CAPTION]
INSTRUCTIVISION, INC.
NOTES TO FINANCIAL STATEMENTS --(continued)
September 30, 1996
NOTE 5. Capitalized Software
For the years ended September 30, 1996 and 1995, accumulated
amortization of costs related to computer software products held for
sale was $307,003 and $261,034, respectively.
NOTE 6. Notes Payable
Notes payable at September 30, 1996 and 1995 consist of the
following:
<TABLE>
1996 1995
---------- ---------
<S> <C> <C>
Installment loan with Sony Electronics Inc.
maturing March 1998, payable monthly with
interest at 11 1/2%. The loan is collater-
alized by equipment of the Company $ 60,455 $ 95,363
Installment loan with First Fidelity Bank
maturing June 2000, payable monthly, with
interest of approximately 10.5%. This loan
is collateralized by an automobile of the
Company 26,497 31,419
Installment loan with Fleet Bank
commencing January 1994, payable in
24 monthly installments with interest of
approximately 9.5% 0 3,333
-------- --------
86,952 130,115
Less current portion 45,594 43,633
-------- --------
Amount due after one year $ 41,358 $ 86,482
======== ========
The following are the maturities of long term debt outstanding at
September 30, 1996:
<S> <C>
1997 45,594
1998 27,953
1999 7,364
2000 6,042
</TABLE>
NOTE 7. Related Party Transactions (See Note 11)
a. Pursuant to a promissory note dated June 1, 1987, the principal
stockholder has agreed to make short term cash advances to the Company.
The advances are to be repaid upon demand with interest payable monthly
at 4% above the First Fidelity Bank's floating base commercial lending
rate. The note is collateralized by specific equipment owned by the
Company. The maximum advance amount is $75,000. The balance owed at
September 30, 1996 and 1995 was $45,000 and $50,550, respectively.
<PAGE>
[CAPTION]
INSTRUCTIVISION, INC
NOTES TO FINANCIAL STATEMENTS --(Continued)
September 30, 1996
b. The Company is affiliated with a major customer of the Company,
whose Associate Executive Director is a Director of the Company.
c. The Company has a three year employment agreement with Rosemary
Comras, President and principal stockholder of the Company, to employ
Ms. Comras at a salary of $75,000 per year which commenced on September 1,
1996, with rate increases to $78,500 on September 1, 1997 and $83,000 on
September 1, 1998. Ms. Comras receives a 2.5% bonus of the Company's net
profit before taxes, commencing September 1, 1996.
NOTE 8. Fair Value of Financial Instruments
The Company has a number of financial instruments, none of which
are held for trading purposes. The Company estimates that the fair
value of all financial instruments at September 30, 1996, does not
differ materially from the aggregate carrying values of its
financial instruments recorded in the accompanying balance sheet.
The estimated fair value amounts have been determined by the Company
using available market information and appropriate valuation
methodologies. Considerable judgment is necessarily required in
interpreting market data to develop the estimates of fair value and,
accordingly, the estimates are not necessarily indicative of the
amounts that the Company could realize in a current market exchange.
NOTE 9. Income Taxes
Effective October 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting
for Income Taxes." The cumulative effect of adopting SFAS No. 109 was
to increase the net income by $188,000 or $.06 per share for the year
ended September 30, 1994.
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. Significant components of the Company's deferred tax
liabilities and assets as of September 30, 1996 and 1995 are as
follows:
1996 1995
----------- ------------
[S] [C] [C]
Deferred tax liabilities :
Depreciation $ 27,000 $ 28,000
Deferred tax assets:
Net operating loss carryforwards 146,000 151,000
Tax credit carryforwards 35,000 35,000
Alternate minimum tax paid credit 40,000 --
Valuation allowance (107,000) (40,000)
--------- ---------
Deferred tax assets 114,000 146,000
--------- ---------
Net deferred tax assets $ 87,000 $118,000
========= =========
<PAGE>
[CAPTION]
INCTRUCTIVISION, INC.
NOTES TO FINANCIAL STATEMENTS --(Continued)
September 30, 1996
The valuation allowance for deferred tax assets was increased
by $3,000 for the year ended September 30, 1995 due to the
expectation of State net operating loss carryforwards expiring unused.
For the year ended September 30, 1996 the valuation allowance was
decreased by $5,000 for the year ended due to expiration of State net
operating loss carryforwards of and increased by $72,000 due to
uncertainty of realization with respect to Federal net operating loss
carryforwards.
Significant components of the provision for income taxes are as
follows:
<TABLE>
1996 1995 1994
-------- ------- ---------
<S> <C> <C> <C>
Current:
Federal $(22,000) $ -- $ --
State -- -- --
-------- -------- -------
Total current (22,000) -- --
Deferred:
Federal 26,000 3,000 52,000
State 5,000 6,000 9,000
-------- ------- -------
Total deferred 31,000 9,000 61,000
-------- ------- -------
Total income tax expense* $ 9,000 $ 9,000 $61,000
======== ======= =======
*)Excluding 1996 extraordinary item.
The reconciliation of income tax from continuing operations
computed at statutory rates to the Company's effective tax rate is as
follows:
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Statutory rate (30)% 30% 30%
State income tax ( 9) 9 9
Non-deductible expenses 36 35 37
Net operating loss (50) (53) (20)
Changes in valuation allowance 61 11 (14)
---- ---- ----
Total 8% 32% 42%
==== ==== ====
</TABLE>
The Company has available for Federal and State income tax
purposes operating loss caryforwards and unused investment tax credits
which may provide future tax benefits in the approximate amounts
expiring as follows:
<TABLE>
Federal State
---------------------------------- --------------
Year of Operating Loss Investment Tax Operating Loss
Expiration Carryforward Credit Carryforward Carryforward
- --------------- -------------- ------------------- --------------
<S> <C> <C> <C>
1998 -- -- 9,000
2000 -- 1,000 --
2001 -- 34,000 --
2002 249,000 -- 63,000
2003 -- -- --
2004 144,000 -- --
2006 15,000 -- --
2008 63,000 -- --
--------- ---------- ---------
$ 462,000 $ 35,000 $ 72,000
========= ========== =========
</TABLE>
<PAGE>
[CAPTION]
INSTRUCTIVISION, INC.
NOTES TO FINANCIAL STATEMENTS --(continued)
September 30, 1996
NOTE 10. Commitment and Contingencies
a. Leases
- ---------
The Company currently leases space at 3 Regent Street, Livingston,
New Jersey, to June 2001. Rent expense, including escalation on
certain contingent expenses, was $152,597 in 1996, $154,287 in 1995,
and $162,595 in 1994, respectively. Future minimum rental commitments,
not including escalation on certain contingent expenses, for the years
ended September 30th, are as follows:
[S] [C] [C]
1997 109,605
1998 109,605
1999 109,605
2000 109,605
2001 82,204
b. Royalties
- ------------
The Company has entered into royalty agreements with certain
individuals who have participated in developing certain Company
products. In general, the royalties are only due after all costs,
per each contract, are recovered by the Company. The amount of future
royalties due is directly dependent on the Company's revenue on each
particular contract.
c. Concentration of Credit Risk
- -------------------------------
Financial instruments which potentially subject the Company to
concentration of credit risk consist principally of cash and trade
receivables. Concentration of credit risk with respect to trade
receivables is limited due to the large number of customers comprising
the Company's customer base. The Company maintains cash balances at
various financial institutions. Accounts at each institution are
secured by the Federal Deposit Insurance Corporation up to $100,000.
Uninsured balance are approximately $900,000 at September 30, 1996.
NOTE 11. Extraordinary Item
In August of 1996 the President of the Company, since inception,
passed away. During his tenure as president the Company maintained a
$1,000,000 term life insurance policy on his life. The insurance
proceeds have been reflected as an extraordinary item in the
accompanying financial statements.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE V
INSTRUCTIVISION, INC.
PROPERTY, PLANT AND EQUIPMENT
For the Three Years Ended September 30, 1996
Balance at Additions at Balance at
Classification beginning cost purchased Retire- end of
of period by Company ments period
- --------------- ---------- -------------- -------- -----------
<S> <C> <C> <C> <C>
Year ended
September 30, 1994
Furniture & fixtures $ 33,725 $ --- $ -- $ 33,725
Video equip.& computers 983,054 146,389 -- 1,129,443
Automobile 17,246 -- -- 17,246
Leasehold improvements 95,497 4,754 -- 100,251
---------- --------- ------- ----------
Total $1,129,522 $ 102,786 $ -- $1,280,665
========== ========= ======= ==========
Year ended
September 30,1995
Furniture & fixtures $ 33,725 $ 2,676 $ -- $ 36,401
Video equip.& computers 1,129,443 216,384 -- 1,345,827
Automobile 17,246 32,681 -- 49,927
Leasehold improvements 100,251 9,269 -- 109,520
----------- -------- ------ ----------
Total $1,280,665 $261,010 $ -- $1,541,675
========== ======== ====== ==========
Year ended
September 30, 1996
Furniture & fixtures $ 36,401 $ -- $ 1,802 $ 34,599
Video equip.& computers 1,345,827 7,116 90,644 1,262,299
Automobile 49,927 -- -- 49,927
Leasehold improvements 109,520 -- -- 109,520
---------- -------- ------- ----------
$1,541,675 $ 7,116 $92,446 $1,456,345
========== ======== ======= ==========
</TABLE>
[FN]
See accountant's report on supplemental schedules
<PAGE>
<TABLE>
<CAPTION> SCHEDULE VI
INSTRUCTIVISION, INC.
ACCUMULATED DPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
For the Three Years Ended September 30, 1996
Balance at Additions Balance at
Classification beginning charged to Retire- end of
of period cost & exp. ment period
- --------------- ---------- ------------ -------- ----------
<S> <C> <C> <C> <C>
Year ended
September 30,1994
Furniture & fixtures $ 29,996 $ 1,688 $ -- $ 31,684
Video equip.& computers 807,581 64,846 -- 872,427
Automobile 17,246 -- -- 17,246
Leasehold improvements 72,688 9,536 -- 82,224
---------- --------- ------- ----------
Total $ 927,511 $ 76,070 $ -- $1,003,581
========== ========= ======= ==========
Year ended
September 30,1995
Furniture & fixtures $ 31,684 $ 905 $ -- $ 32,589
Video equip.& computers 872,427 99,365 -- 971,792
Automobile 17,246 906 -- 18,152
Leasehold improvements 82,224 11,177 -- 93,401
---------- --------- ------- ----------
Total $1,003,581 $ 112,353 $ -- $1,115,934
========== ========= ======= ==========
Year ended
September 30, 1996
Furniture & fixtures $ 32,589 $ 860 $ 1,802 $ 31,647
Video equip & computer 971,792 112,265 90,644 993,413
Automobile 18,152 12,712 -- 30,864
Leasehold improvements 93,934 132,833 -- 100,397
---------- --------- ------- ----------
$1,115,934 $ 132,833 $92,446 $1,156,321
========== ========= ======= ==========
</TABLE>
[FN]
See accountant's report on supplemental schedules
<TABLE>
<CAPTION> SCHEDULE x
INSTRUCTIVISION, INC.
SUPPLIEMENTAL INCOME STATEMENT INFORMATION
For each of the Three Years Ended September 30, 1996
<S> <C>
For the year ended September 30, 1994
Amortization $ 28,225
Maintenance and repairs 9,883
Royalties 47,318
Advertising 16,438
For the year ended September 30, 1995
Amortization 38,556
Maintenance and repairs 3,095
Royalties 28,297
Advertising 20,725
For the year ended September 30, 1996
Amortization 45,969
Maintenance and repairs 9,971
Royalties 40,607
Advertising 15,725
</TABLE>
[FN]
See accountants report on supplemental schedules.
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of
1934, the registrant has duly cause this report to be signed on its
behalf by the undersigned thereunto duly authorized.
INSTRUCTIVISION, INC.
Registrant
December 30, 1996 Rosemary Comras
President,
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant in the capacities and on the dates indicated:
Signature Title and Capacity Date
- ---------------- ------------------ --------
Rosemary Comras President, Secretary/Treasurer 12/30/96
Thomas F.Koerner Director 12/30/96
Marcus Ruger Director 12/30/96
David Sousa Director 12/30/96
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Sep-30-1996
<PERIOD-START> Oct-01-1995
<PERIOD-END> Sep-30-1996
<CASH> 1007906
<SECURITIES> 0
<RECEIVABLES> 296728
<ALLOWANCES> 0
<INVENTORY> 280078
<CURRENT-ASSETS> 1599313
<PP&E> 1456345
<DEPRECIATION> 1156321
<TOTAL-ASSETS> 2185990
<CURRENT-LIABILITIES> 272793
<BONDS> 0
<COMMON> 3350
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 2185990
<SALES> 1138171
<TOTAL-REVENUES> 1138171
<CGS> 751974
<TOTAL-COSTS> 1248411
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 16808
<INCOME-PRETAX> (110240)
<INCOME-TAX> 9000
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 938000
<CHANGES> 0
<NET-INCOME> 818760
<EPS-PRIMARY> .24
<EPS-DILUTED> .24
</TABLE>
