UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
Annual Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Fiscal Year Ended September 30, 1998
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:
(973) 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(g) of the ACT:
Common Stock $0.001 par value
- -----------------------------
(Title of Class)
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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-KSB or any amendment to this Form 10-KSB.
YES [X] NO [ ]
The aggregate market value of the voting stock held by non-
affiliates of the Company as of December 30, 1998, was $525,950
based on the over-the-counter closing bid price of $.157 per share on
December 30, 1998.
The number of shares of Common Stock, .001 par value, of the
Company, issued and outstanding as of December 30, 1998 was
3,350,000.
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PART I
ITEM 1. BUSINESS
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The Company
- ------------
Instructivision, Inc. (the "Company") is a multimedia publishing
and production company that develops educational software, video
tapes, and related workbooks, and instructional video tapes for
businesses, principally for employee training, public relations and
product advertisement. Educational products, which accounted for
approximately 28% of the Company's sales in fiscal 1998, are sold to middle
and high schools throughout the United States to prepare students for
basic skills, high school graduation and college admissions tests.
The Company also produces educational software and textbooks for other
publishers under royalty agreements and/or fixed fee contracts. Royalties
accounted for approximately 10% of educational revenues in 1998.
The Company owns a video production studio and post-production
facility in which it creates video programs for schools and industry.
Corporate clients use the Company's video services to create employee
orientation videos, medical information, product introductions and
infomercials. The Company's services include script writing, on-location and
studio recording, audio recording, digital and analog editing, graphics
animation, print, CD-ROM recording and duplication services. Corporate
video production sales now account for approximately 72% of the Company's
revenues.
Background
- ----------
The Company, a New Jersey corporation, was established in 1981 to
develop and market multi-media educational products principally for
high school students preparing for college entrance tests. The Company's
school products currently include workbooks, computer software and video
programs for high school and middle school students, and instructional
video tapes for teachers, administrators and parents.
Effective October 1, 1998, with limited exceptions the Company's
educational products are being marketed exclusively by Queue, Inc. (see
"Marketing" below).
In 1986, the Company built a video production studio and postproduction
facility to produce instructional video tapes for its own distribution and
to service the corporate and advertising community in central New Jersey.
Current Activities
- ------------------
1. Commercial video production
The Company's video production facility is located on a busy highway
between Rt 80 in the North and Rts 78 and 287 to the South, in central
New Jersey. The Company seeks out large and mid-sized companies who utilize
video as a tool for employee orientation, meetings, product training, and
advertising.
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The Company's full service video production facility consists of
a studio, two interformat digital editing suites, one non-linear
editing room, audio recording, animation and graphics equipment.
2. Educational video tapes, software and workbooks:
The Company's software products are available for MS-Dos, Windows
and Macintosh formats. Individual products are priced from $89 for
single computer use to $1100 for site and network licenses. Workbooks
are generally priced from $6 to $10/ea. The Company sells its video
tapes for $39 - $350/ea. The principal educational products sold during
the fiscal year ended September 30, 1998 were as follows:
HSPT SUCCESS, EWT SUCCESS, PRE-HSPT consist of a series of software,
textbooks and video tapes sold to middle and high schools in
New Jersey. The State of New Jersey has since 1986 mandated that all
students in public high schools must pass a basic skills test. In 1991
the State's Department of Education introduced an "Early Warning Test"
for students entering high school. The Company introduced its first
High School Proficiency test preparation material in 1987 and has updated
and revised it since then to conform to changes in format and types of
questions.
In February 1998, the New Jersey Department of Education announced new
tests for 4th (ESPA), 8th (GEPA), and 11th grade students (HSPA) which will
replace the current HSPT and EWT in 1999-2000. The proposed change in test
format greatly reduced sales of existing material in fiscal 1998 as schools
were waiting for new products.
The Company completed new text books for the Grade Eight Proficiency
Assessment (GEPA) in Mathematics and Language Arts in October 1998 and is
scheduled to have new GEPA software and several HSPA products ready for
publication before implementation of the new tests in October 1999.
The New Jersey test preparation materials account for approximately 15% of
the Company's sales. The Company participates in local and state conventions
and educational fairs to promote its products.
The Company produces SAT and ACT software and video products which are
sold nationally to high school administrators by the National Association
of Secondary School Principals (NASSP), and Queue, Inc., the Company's
exclusive distributor. The first multimedia SAT test preparation video
course produced by the Company was published in 1983 by the NASSP. In 1984,
it won the prestigious Cable Network's ACE award for excellence in
educational broadcasting. The current test preparation material consists of
the following titles: Improving College Admission Test Scores on the ACT,
SAT Excellerator (workbooks and software), ACT Excellerator (workbooks and
software), SAT EDGE (video course with workbooks), Improving Students'
College Admission Test Scores on the SAT and ACT videos for teachers, and a
CD ROM program to be completed in December 1998. The Company receives a
royalty of 15 - 33% on NASSP's gross sales. The Company pays the NASSP a
royalty of 20 - 30% on such products sold by the Company.
In 1995 the Company entered the Florida high school test market
with programs similar to the New Jersey products. The HSCT SUCCESS series
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of software and textbooks 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
the Company's products in Florida were approximately 4% of the Company's
gross sales for the fiscal year ended September 30, 1998.
The Company publishes a software program, LEAP Success in Mathematics
for the Louisiana Educational Assessment Program, a test which Louisiana
high school seniors must pass to receive their diploma. A software program
entitled LEAP Success in Language Arts is scheduled for release in 1999.
Some of the Company's video tapes are marketed under the trade
name Inservice Video Network to school administrators and educators.
The Company has an agreement with the NASSP under which the NASSP
receives a royalty of 15% on annual net sales of the products (gross sales
less returns and royalties paid to the authors). The Company has published
over 85 video tapes since 1986. The authors of the individual tapes receive
royalties of 5-12% from the sales of their respective tapes. Revenues
from the sale of these products were approximately 5% of the Company's
sales in fiscal 1998.
Other programs published by the Company consist of the following: a
video tape entitled THE FROG: INSIDE-OUT, software programs MASTERING THE
GED, STUDY SKILLS FOR SUCCESS, video programs for elementary school teachers,
KEY IT IN - a two part calculator practice textbook, and WORKLINK, a
school-to-work resume builder. Revenues from these programs account for
less than 3% of the Company's sales.
The Company is obligated to pay royalties to authors of some of
the Company's products. Such royalties payable range from 5% to 10%.
All of the Company's software products are available for 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
new hardware which becomes available to the school market.
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 1998 were approximately $51,000.
Research and 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.
New Products
- ------------
The Company's new projects under development are:
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GEPA SUCCESS software programs for Mathematics and Language Arts; these
products will replace the EWT SUCCESS series. The Windows and Macintosh
versions are expected to be completed in March 1999.
HSPA SUCCESS in Mathematics and Language Arts Literacy; books and
software are being developed for publication by summer 1999.
LEAP SUCCESS in Language Arts, a test preparation software package for
students taking the Louisiana basic skills test. The mathematics software
program was completed in November 1997.
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 in spring 1999.
The Company plans to produce new video tapes during fiscal 1999.
Future Plans
- ------------
The Company intends to continue expanding its product lines, and to
update existing software in step with new technological developments.
The Company continually seeks out new concepts to develop new instructional
methods utilizing various media that assist children and adults gain
proficiency in academic and work skills.
The Company frequently revises and updates its educational products
to conform to any changes in testing standards and formats or replaces
any product determined to be obsolete.
The Company's video production facility offers competitive rates
consistent with the area's market. The Company plans to enter the DVD market
because it believes this media results in a sharper picture display and
audio performance on a computer monitor, than standard CD-ROM display,
which will increase demand for the product in the near future.
Marketing
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The Company's products are sold in highly competitive markets. The
school publishing industry is dominated by Fortune 100 companies who have
superior marketing resources and advertising funds. The Company has been
successful in providing other publishers with quality products on a fee
plus royalty basis. However, revenues from such products will decrease as
the products reach obsolescence.
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 35% from the sale of the programs.
The Company has entered into a Distribution Agreement with Queue,
Inc., effective October 1, 1998. Pursuant to the Distribution Agreement,
with limited exceptions Queue, Inc. acts as the exclusive distributor of
the Company's educational products. In general, the Company receives 45%
to 65% of Queue, Inc.'s net revenues (as defined) from sales of these
products, except that the Company receives 25% of sales of new products
(as defined) developed by Queue, Inc. based on the Company's products.
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Queue Inc. will warehouse the products and provide technical support and
customer service, and will manufacture CD-ROMs, floppy disks, and related
manuals. The Distribution Agreement has an initial term of ten years,
but is cancelable by either party on a year's notice.
Seasonality of the Business
- ---------------------------
The educational marketplace is subject to seasonal fluctuations in
its business which correlate to the traditional school year. 50% of
the Company's educational product sales are realized during the fourth
quarter of its fiscal year. Revenues from video production services have
in the past not been affected by season, thereby providing year-round
cash flow for the Company.
Employees
- ---------
The Company had 10 full-time employees at September 30, 1998.
The Company's full time staff includes video engineers, editors, a software
programmer, video production sales staff, and administrative personnel.
The Company does not believe that the departure of any particular employee
would have a long term adverse effect on the Company's operations.
The Company utilizes outside 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 outside
technical personnel and writers, while maintaining lower 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 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.
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A portion of the Company's products is marketed 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 un-
determinable.
Some of the Company's video programs are marketed under the trade
name INSERVICE VIDEO NETWORK, and VIDEO WORKSHOP.
Backlog
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The Company's sales backlog at September 30, 1998 consisted of
contractual video production obligations to be filled over the next
45 days of approximately $70,000 and orders for computer software
and books in the amount of $50,000.
Competition
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The market for test preparation material is highly competitive,
characterized by continual change in technology, and dominated by certain
large corporations. The Company's competitors include ACT, College Board
Curriculum Associates, ETS, Educational Design, Hartcourt-Brace, Kaplan,
Peterson, and Steck Vaughn. These competitors have more industry
experience, and larger manufacturing, marketing, and servicing capabilities
than the Company. There already is a large number of software, video and
CD-ROM programs directed at preparing students for the SAT and ACT
on the market.
The Company competes with other video production companies
producing commercials and instructional video programs in the central
New Jersey area. Many large corporations have their own inhouse production
capabilities. Corporations, in seeking to reduce operating costs, exert
pressure on suppliers and vendors for price reductions and lower bids on
video productions. The recent introduction of lower priced non-linear PC
video editing equipment has enabled some of the Company's previous customers
to purchase their own video editing equipment.
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 its ability to integrate video, audio and
software production to a wide range of new applications: CD-ROM, DVD,
and the internet.
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ITEM 2. Property
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The Company's offices, teleproduction studio and software production
facilities are housed in approximately 7,300 sq.ft. of leased office space
at 3 Regent Street, near a major highway in Livingston, New Jersey. The
monthly rent as of September 30, 1998 was $9,133.75. The lease will expire
on June 30, 2001. Under the lease, the Company is responsible for insurance,
maintenance, property 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 its business.
ITEM 3. Legal Proceedings
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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.
Fiscal year ended Common Stock
High Low
- ------------------------------ ---- ---
1997
<TABLE>
<S> <C> <C>
First Quarter .33 .25
Second Quarter .33 .25
Third Quarter .33 .25
Fourth Quarter .33 .25
1998
First Quarter .25 .15
Second Quarter .25 .15
Third Quarter .25 .15
Fourth Quarter .25 .15
</TABLE>
At December 30, 1998 management believes that the approximate number
of beneficial holders of the Company's Common Stock was 250. This
number is based upon the Company's stockholder mailing list and information
provided to the Company by investors. At December 30, 1998 the
Company's transfer agent advised that there were 199 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 NASDAQ system.
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ITEM 6. Management's Discussion and Analysis of Financial Condition
and Results of Operation.
- -------------------------------------------------------------------
Total sales for fiscal 1998 were $1,256,463, an increase of
$111,589 or 10% as compared to $1,144,874 for fiscal 1997. Revenues
from video production services showed an increase of 55% in 1998
over the previous year while educational sales declined 31%
during the same period.
Educational product sales were $350,086 for the year ended
September 30, 1998, a decline of 31%, compared to $504,112 for fiscal
1997. The decline was due to the phase-out of the New Jersey high school
proficiency test (HSPT) and early warning test (EWT) which in 1999 are
being replaced with a new HSPA and GEPA tests. The Company is developing
products for the new tests, the first of which are textbooks for GEPA
published in October 1998.
The new GEPA tests will first be administered to all New Jersey
8th grade students in March 1999. On September 30 1998, the Company had
backorders for new test preparation books and software material in
the amount of approximately $50,000.
Video production showed an increase in gross sales of 55%. Revenue for
fiscal 1998 were $906,377 as compared to $640,762 in fiscal 1997. Operating
costs for video production have increased from 68% to 82% of sales during
the same period. Management believes that video production profit margins
are being adversely affected by a variety of factors, including but not
limited to increased competition from low cost digital computer editing
systems (Media 100 and AVID), and the corporate customers' need to reduce
costs by demanding lower production rates through competitive bidding.
Technology changes require constant upgrades of existing equipment, which,
together with increasing payroll insurance costs, have contributed to
higher cost of sales.
The Company entered into a Distribution Agreement with Queue, Inc.
effective October 1, 1998. Management believes this agreement will allow
the Company to concentrate its resources in the development of products
for publication and to benefit from an expanded distribution network.
General and administrative expenses declined in fiscal 1998 from the
previous year. G&A expenses were $448,262 compared to $521,493 in 1997.
The Company expects that by eliminating warehousing, distribution and
customer support costs for the educational products pursuant to the Queue,
Inc. Distribution Agreement, the selling and administrative expenses can be
further reduced in fiscal 1999.
On September 30, 1998 the Company's investment portfolio had a
market value of $724,767 compared to $905,485 at the end of September 1997.
The Company invests approximately 75% of its cash reserves in growth mutual
funds with the balance in a government securities mutual fund.
Cash provided by operating activities will continue to be the primary
source of operating funds. The Company utilizes income from its securities
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portfolio for operating funds and capital equipment purchase.
Accounts receivable were $375,685 and $356,836, respectively for
the years ended September 30, 1998 and 1997. The increase in accounts
receivable level was due to the billing of a large corporate video contract
which was completed in September of approximately $112,000.
Management believes that the Company's cash and marketable
securities position, along with funds generated from operating activities
will be sufficient to meet cash requirements for the foreseeable future.
Management reports that its educational software products are not
date sentitive and are therefore y2k compliant. The Company administrative
and accounting software have been updated for year 2000 application.
ITEM 7. Financial Statements and Supplementary Data
- ----------------------------------------------------
See attached Financial Statements.
ITEM 8. Disagreements on Accounting and Financial Disclosure
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None
PART III
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ITEM 9. Directors and Executive Officers of Registrant
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The executive officers and directors of the Company, and further
information concerning them, are as follows:
Rosemary Comras 58 President, Secretary/Treasurer and
Marcus Ruger 67 Director
Dale Spaulding 58 Director
David Sousa 58 Director
Rosemary Comras was elected President of the Company on September 4,
1996 following the death of Jay Comras, the founder,former 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.
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.
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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 provides 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.
Dr. Dale Spaulding was elected as director at the last Stockholder's
meeting on April 23, 1998 to replace Dr. Koerner who resigned for personal
reasons. Dr Spaulding was employed as principal of the Lampeter-Strasburg
High School District from July 1973 till September 1997. Dr Spaulding
served as President of the NASSP from 1993 to 1994 and as member of the
Board of Directors of the Internationl Confederation of Principals from
1993 to 1996. Dr. Spaulding will 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 1998 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 10. Executive Compensation
- --------------------------------
The following table sets forth information concerning the com-
pensation paid to Rosemary 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>
Fiscal Salary Other
year Compensation(1)
- ------------- ------ --------- ---------------
<S> <C> <C> <C>
Rosemary Comras, 1997 $75,000 $ 3,780
Chairman of the Board 1998 82,027 3,900
President and CEO
</TABLE>
(1) Compensation consists of reimbursement of health insurance premiums.
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 cash bonus of 2.5% of the
Company's net profit before taxes.
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
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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.
Compensation of Directors
- -------------------------
Outside directors receive $500 for each board meeting and
$100/hr. for participation in committees or as consultants to the Company,
and are reimbursed for the reasonable out-of-pocket expenses incurred
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:
<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
Marcus C. Ruger -- --
3131 South Vaughn Way
Aurora CO
Dale Spaulding -- --
301 West Hillcrest Ave
Strasburg PA
David Sousa 6,000 --
729 Belvidere Avenue
Plainfield NJ
- --------------------------------------------------------------
All officers and directors
as a group (4 persons) 2,081,000 62%
</TABLE>
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ITEM 12. Certain relationships and related transactions
- -------------------------------------------------------
none
PART IV
-------
ITEM 13. 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 Selling Agreement (B)
1.4 Form of Agreement among Underwriters (B)
1.5. Form of Representative'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)
10.2b Renewal of Employment Contract with Rosemary Comras (P)
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 Agreement with the NASSP (Achievment Tests) (A)
10.6 Agreement with Research for Better Schools (A)
10.7 Memorandum of Agreement with the NASSP (ACT) 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)
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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 Jay and Rosemary Comras (J)
10.21 Agreement with NASSP for Inservice Video Network (K)
10.22 Agreement with NASSP (ACT preparation Programs (M)
10.23 Distribution Agreement with Queue, Inc. (Q)
(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, on 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 on 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 Jan. 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
(P) Filed with From 10-K on December 30, 1996
(Q) Filed herewith
Page 15
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Instructivision, Inc.
We have audited the accompanying balance sheet of Instructivision,
Inc. as of September 30, 1998, and the related statements of operations,
stockholders' equity and cash flows for the years ended September 30,
1998 and 1997. 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 audit provides
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, 1998, and the results of its
operations and its cash flows for the years ended September 30, 1998, and
1997 in conformity with generally accepted accounting principles.
STANLEY J. MORIN & ASSOCIATES, P.C.
Cedar Knolls, New Jersey
December 24, 1998
Page 16
<PAGE>
<TABLE>
<CAPTION>
INSTRUCTIVISION, INC
BALANCE SHEET
September 30, 1998
1998
-----------
<S> <C>
Current assets
Cash $ 11,610
Accounts receivable 375,685
Investments 724,767
Inventory 161,182
Prepaid expenses 16,139
Deferred income taxes 7,500
----------
Total current assets 1,296,883
Property and equipment at cost, less
accumulated depreciation 229,970
Other assets
Capitalized software - net of amortization 175,840
Deposits 13,125
Deferred income taxes 49,500
----------
Total other assets 238,465
----------
Total assets $1,765,318
==========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Current liabilities
Accounts payable $ 87,299
Accrued expenses 61,482
Notes payable - current portion 7,301
----------
Total current liabilities 156,082
Notes payable, less current portion 6,684
----------
Total liabilities 162,766
----------
Stockholder's equity
Common Stock, $.001 par value, 10,000,000
shares authorized, 3,350,000 shares issued
and outstanding 3,350
Additional paid-in capital 1,425,218
Accumulated earnings 162,736
Unrealized gain on investment, net
of income tax 11,248
----------
Total stockholder's equity 1,602,552
----------
Total liabilities and stockholders equity $1,765,318
==========
</TABLE>
[FN]
See accompanying notes to financial statements
Page 17
<PAGE>
<TABLE>
<CAPTION>
INSTRUCTIVISION, INC.
STATEMENT OF OPERATIONS
For each of the Two Years ended September 30, 1998
1998 1997
---------- ----------
Revenues
<S> <C> <C>
Net sales: Products $ 350,086 $ 504,112
Services-unaffiliated 906,377 585,695
Services-affiliated -- 55,067
_________ _________
Total revenues 1,256,463 1,144,874
Costs and expenses
Cost of sales
Products 291,243 319,106
Services-unaffiliated 740,785 435,582
Services-affiliated -- 40,953
----------- -----------
Total cost of sales 1,032,028 795,641
General and administrative expenses 448,262 521,493
Interest expense 2,832 9,192
Investment income (70,083) (80,193)
----------- -----------
Income (loss) before income taxes (156,576) (101,259)
Provision for income taxes 2,700 20,000
----------- -----------
Net income (loss) $ (159,276) $ (121,259)
=========== ===========
Earnings (loss) per share (.05) (.04)
=========== ===========
</TABLE>
[FN]
See accompanying notes to financial statements
Page 18
<PAGE>
<TABLE>
<CAPTION>
INSTRUCTIVISION, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Two Years Ended September 30, 1998
Common Stock Additional Accum. Unrealized Total
Shares Amount paid-in (Deficit) Gain on
Capital Earnings Investments
--------- ------ ---------- -------- -------- ----------
Balance,
<S> <C> <C> <C> <C> <C> <C>
Sept.30,1996 3,350,000 $3,350 $1,425,218 $443,271 $ -- $1,871,839
Net loss
for year -- -- -- (121,259) 43,870 (77,389)
--------- ------ ---------- --------- -------- -----------
Balance,
Sept.30,1997 3,350,000 $3,350 $1,425,218 $322,012 43,870 $1,794,450
Net loss
for year -- -- -- (159,276) (32,622) (191,898)
--------- ------ ---------- --------- -------- -----------
Balance
Sept.30,1998 3,350,000 $3,350 $1,425,218 $162,736 $11,248 $1,602,552
========= ====== ========== ========= ======== ===========
</TABLE>
[FN]
See accompanying notes to financial statements
Page 19
<PAGE>
<TABLE>
<CAPTION>
INSTRUCTIVISION, INC.
STATEMENT OF CASH FLOWS
For each of the Two Years Ended September 30, 1998
1998 1997
----------- -----------
<S> <C> <C>
Operating activities:
Net income (loss) $ (159,276) $ (121,259)
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 124,915 112,072
Amortization of capitalized software 57,443 38,344
Gain on sale of investment securities 16,288 --
Deferred income taxes (19,000) 20,000
Changes in operating assets and liabilities:
(In)decrease in accounts receivable
- unaffiliated (18,849) (77,484)
- affiliated -- 17,376
Increase in inventory and prepaid expenses 28,032 79,326
(De)increase in accounts payable and
accrued expenses (3,425) (29,993)
----------- ----------
Net cash provided by operating activities 26,128 38,382
Investing Activities:
Additions to capitalized software (52,421) (22,678)
Purchases of property, plant and equipment (65,646) (101,287)
Purchases of investments -- (832,615)
Sales of investments 131,808 --
----------- -----------
Net cash utilized in investing activities 13,741 (956,580)
Financing activities:
Principal payment on credit lines,notes
payable and capital lease obligations (29,896) (88,071)
----------- -----------
Net cash (utilized) provided by
financing activities (29,896) (88,071)
(De)increase in cash 9,973 (1,006,269)
Cash at beginning of year 1,637 1,007,906
----------- -----------
Cash at end of year $ 11,610 $ 1,637
=========== ===========
<CAPTION>
Supplemental disclosure of cash flow information:
1998 1997
------- --------
Cash paid during the year for
<S> <C> <C>
Interest $2,832 $ 8,447
Income taxes 150 38,969
</TABLE>
[FN]
See accompanying notes to financial statements
Page 20
<PAGE>
INSTRUCTIVISION, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1998
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
- ---------------
The Company uses 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.
d. Capitalized Software Costs
- -----------------------------
Product development includes all expenses related to future releases
and enhancements of the products, including research, development, porting
of software to new operating systems and platforms, documentation, develop-
ment of training programs, less allowable capitalized software development
costs.
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 ended September 1998, and 1997 and have
been expensed.
Page 21
<PAGE>
INSTRUCTIVISION INC.
NOTES TO FINANCIAL STATEMENT--(Continued)
September 30, 1998
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, 1998 and 1997. 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. Investment
At September 30, 1998, investments consisted of securities classified
as available for sale.
Following are the market values as determined by quoted market prices
and original cost of marketable securities available for sale as of
September 30, 1998:
[CAPTION]
Market Cost Unrealized
Value Gain
---------- --------- ----------
[S] [C] [C] [C]
Mutual Funds $ 724,767 $ 706,019 $ 18,748
Included in shareholders' equity at September 30, 1998 is $11,248
of unrealized gains on marketable securities available for sale, net of
income tax of $7,500. The cost basis of securities sold is determined by
using specific identification.
NOTE 4. Inventory
The components of inventory at September 30, 1998 are as follows:
<TABLE>
1998
---------
<S> <C>
Work in Process (video production cost) $ 432
Finished Goods (video) 108,477
Finished Goods (workbooks) 52,273
---------
$ 161,182
=========
</TABLE>
Page 22
<PAGE>
INSTRUCTIVISION, INC
NOTES TO FINANCIAL STATEMENTS --(Continued)
September 30, 1998
NOTE 5. Property and Equipment
At September 30, 1998 property and equipment is comprised of the
following:
<TABLE>
Life (yrs) 1998
----------- ----------
<S> <C> <C>
Furniture and fixtures 3 - 8 $ 65,834
Video equipment and computers 3 - 10 1,362,246
Automobile 3 51,552
Leasehold improvements 5 - 10 109,520
-----------
1,589,152
Less accumulated depreciation 1,359,182
-----------
Net $ 229,970
===========
</TABLE>
NOTE 6. Capitalized Software
For the year ended September 30, 1998 accumulated amortization
of costs related to computer software products held for sale was $269,239.
NOTE 7. Notes payable
Notes payable at September 30, 1998 consisted of the following:
<TABLE>
1998
----------
<S> <C>
Installment loan with First Union Bank
maturing June 2000, payable monthly, with
interest of approximately 10.5%. This loan is
collateralized by an automobile of the Company $ 13,985
---------
13,985
Less current portion 7,301
---------
Amount due after one year $ 6,684
=========
<CAPTION>
The following are the maturities of long term debt outstanding at
September 30, 1998:
<S> <C>
1999 $ 7,301
2000 6,684
</TABLE>
Page 23
<PAGE>
INSTRUCTIVISION, INC.
NOTES TO FINANCIAL STATEMENTS --(Continued)
September 30, 1998
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, 1998 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
Significant components of the Company's deferred income tax liabilities
and assets as of September 30, 1998 are as follows:
<TABLE>
1998
----------
<S> <C>
Deferred tax liabilities :
Depreciation $ 26,000
Unrealized gain on investments 7,500
---------
Total 33,500
Deferred tax assets:
Net operating loss carryforwards 230,500
Tax credit carryforwards 35,000
Alternate minimum tax paid credit 40,000
Valuation allowance (215,000)
---------
Total 90,500
---------
Net deferred tax assets $ 57,000
=========
</TABLE>
The valuation allowance for deferred tax assets was increased by
$60,000 for the year ended September 1998 due to the expectation of
Federal and State net operating carryforwards expiring unused.
Page 24
<PAGE>
INSTRUCTIVISION, INC.
NOTES TO FINANCIAL STATEMENTS --continued
September 30, 1998
Significant components of the provision for income taxes are as
follows:
<TABLE>
<CAPTION>
1998
---------
<S> <C>
Current:
Federal $ 2,500
State 200
--------
Total current 2,700
Deferred:
Federal --
State --
--------
Total deferred --
--------
Total income tax expense $ 2,700
========
The reconciliation of income tax from continuing operations computed
at statutory rates to the Company's effective tax rate is as follows:
1998
------
<S> <C>
Statutory rate (30)%
State income tax (9)
Non-deductible expenses 22
Net operating loss (40)
Changes in valuation allowances 59
----
Total 2%
====
</TABLE>
The Company has available for Federal and State income tax purposes
operating loss carryforwards 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>
2000 -- 1,000 --
2001 -- 34,000 --
2002 249,000 -- 77,000
2003 -- -- 80,000
2004 144,000 -- --
2006 15,000 -- --
2008 63,000 -- --
2009 82,000 -- 9,000
2010 133,000 -- 142,000
--------- ---------- ---------
$ 686,000 $ 35,000 $ 308,000
========= ========== =========
</TABLE>
Page 25
<PAGE>
INSTRUCTIVISION, INC.
NOTES TO FINANCIAL STATEMENTS --continued
September 30, 1998
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 $148,193 in 1998 and $151,359 in 1997,
respectively. Future minimum rental commitments, not including escalation
on certain contingent expenses, for the years ended September 30th,
are as follows:
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 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.
NOTE 11. Subsequent Event
The Company has entered in a Distribution Agreement with Queue, Inc.,
effective October 1, 1998. Pursuant to the Distribution Agreement, with
limited exceptions Queue, Inc. acts as the exclusive distributor of the
Company's educational products. In general, the Company receives 45% to
60% of Queue, Inc.'s net revenue (as defined) from sales of these
products, except that the Company receives 25% of sales of new products
(as defined) developed by Queue, Inc. based on the Company's products.
Queue, Inc. will warehouse the products and provide technical support
and customer service, and will manufacture CD ROMs, floppy disks and
related materials. The Distribution Agreement has an initial term of
10 years, but is cancelable by either party on one year's notice.
Page 26
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
INSTRUCTIVISION, INC.
Registrant
December 30, 1998 s/Rosemary Comras
President
Principal Executive, Financial and
Accounting Officer
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 12/30/98
Marcus Ruger Director 12/30/98
Dale Spaulding Director 12/30/98
David Sousa Director 12/30/98
Page 27
<PAGE>
EXHIBIT 10.23
DISTRIBUTION AGREEMENT
AGREEMENT entered into this 1st day of October, 1998 by and
between Instructivision,Inc., a New Jersey corporation with its principal
place of business located at 3 Regent Street,Livingston, New Jersey 07039
("Instructivision"), and Queue, Inc., a Connecticut corporation with its
principal place of business located at 338 Commerce Drive, Fairfield,
Connecticut 06432 ("Queue").
1. Subject to the next succeeding sentence and paragraph 12, below,
Instructivision hereby appoints Queue as its exclusive distributor in all
markets for ten years from the date hereof for all Instructivision products
listed on Schedule A, attached hereto and incorporated by reference, and all
updates of said products and any other products which the parties mutually
agree to subject to this Agreement (collectively, "Products"). This Agreement
may be canceled by either party on one year's written notice to the other.
Said cancellation will not affect the rights of either party to new products
already created under the provisions of paragraph 8, below. Notwithstanding
the above, Instructivision shall retain the exclusive right to sell books to
the Paterson, New Jersey School Board ("Paterson") and shall have no
obligation to Queue in respect of such sales.
2. Instructivision shall sell its products to Queue for 75%, until
January 1, 1999, and 45% thereafter, of the net revenues realized by Queue
from the sales of said Products, provided that the 75% figure shall apply
to sales made prior to January 1, 1999 even if payment is received by
Queue from the customer after January 1, 1999. For purposes hereof, "net
revenues" shall consist of gross revenues received by Queue on all sales of
products listed on Schedule A, less commissions. Notwithstanding the above,
(i) after January 1, 1999, Queue shall pay Instructivision 60% of total gross
revenues realized by Queue from sales of Inservice Video Network orders
received by Queue as a result of National Association of Secondary School
Principals ("NAASP") promotions, and (ii) after January 1, 1999, Queue shall
pay to Instructivision 55% of net reveues (i.e., gross revenues less
commissions) received by Queue from sales of books.
3. Queue shall warehouse, at no cost to Instructivision, all
inventory of Products. All current and future inventory of Products,
including returns, shall be shipped by Instructivision, at Instructivision's
expense, to Queue, except that Instructivision shall retain sufficient books
to fill future Paterson orders. Queue shall also manufacture, at no cost to
Instructivision, all CD ROMs, floppy disks and related manuals required to
fill orders. Queue shall provide all technical support for Instructivision
Products, which shall include, without limitation, handling of customer
inquiries and complaints. Queue shall be responsible for shipping and
billing customers at its own cost, but may collect and retain reasonable
shipping and halding fees in accordance with standard industry practice in
connection with orders for Instructivison Products. Queue shall insure
Instructivision's inventory against loss in an amount of not less than
$60,000.
4. Instructivision shall not manufacture or duplicate, or cause to
be manufactured or duplicated, any of its Products, except for shipment to
and warehousing by Queue, other than books for Paterson and sufficient
inventory to fill backorders.
Page 28
<PAGE>
5. Instructivision shall forward all orders for Products to Queue,
except for orders for books from Paterson and backorders received prior
to the date hereof.
6. Queue shall advise Instructivision of all sales for each month,
and related revenues and commissions, all in reasonable detail, and shall
pay Instructivision for all sales during that month within 30 days at the
end of the month.
7. In the event that a customer of Instructivision shall be unwilling
to accept billing from Queue, Instructivision, with the written consent of
Queue, may bill the customer directly. All payments shall be endorsed to
Queue and delivered to Queue without depositing, after which Instructivision
shall be paid as if such sale had been made, and related funds collected,
by Queue, all in accordance with the terms of this Agreement.
8. Queue shall have the right, at its sole cost and expense, to
reuse all the content on Instructivision's electronic media in other
titles and in other formats, including CD-ROM (collectively, "New Products"),
and to produce and market such New Products, subject to the rights of, and
receipt of requisite consent from, any third parties claiming rights with
respect to such media/products, including, without limitation, NASSP. In
furtherance thereof, Queue shall provide Instructivision with reasonable
advance written notice of Queue's intent to produce New Products and, if
Instructivision advises that any third party consent is required in
connection therewith, Queue shall not proceed with such production until
such consent is obtained. Queue will pay Instructivision a royalty equal to
25% of net revenues (as defined in paragraph 2, above) on the sales of all
New Products, said royalty payments to be made within 30 days of the close
of every month in accordance with paragraph 6, above. Products with the same
title and/or organization and content as titles on Schedule A do not
constitute New Products. Notwithstanding the above, (i) Queue may not
produce New Products primarily for use and/or sale in New Jersey without
Instructivision's prior written consent, which may be withheld in
Instructivision's absolute and sole discretion, and (ii) Instructivision
shall retain all ownership and copyright rights with respect to all Products
and New Products.
9. Queue shall defend and hold Instructivision harmless from and
against any and all claims, charges, costs and liabilities arising out
of or relating to claims made by Queue in connection with the advertising
and promotion, or manufacture, of Products or arising out of or relating to
the manufacture and sale of New Products, including, without limitation,
claims that any New Product breaches any rights of any third parties as a
result of Queue's modifications or that such New Products are not fit or
appropriate for the purposes claimed by Queue in its advertising and
promotion thereof.
10. In the event Instructivision ceases operations and has no
successors, or for any reason is unable or unwilling to have its products
manufactured or duplicated, Instructivision hereby grants to Queue a license
to manufacture and duplicate the Products. For all Products which Queue
manufactures, Queue shall pay Instructivision only 35% of net revenues (as
defined in paragraph 2, above). The preceding sentence does not apply to
CD ROMs, floppy disks and manuals, which Queue has agreed to manufacture
Page 29
<PAGE>
pursuant to paragraph 3, above, as to which Products the payment provisions
of paragraph 2, above, shall apply.
11. Upon one day's notice, either party, and/or appropriate attorneys
or accountants therefor, may visit the other's facilities and conduct an
audit of the inventory of Products or New Products, and/or an audit of sales
transactions relating to Products or New Products, and of all books and
records relating thereto. This agreement shall also constitute each party's
consent to the inspection by the other party of the records of any
duplicator of inventory of Products or New Products.
12. Notwithstanding anything in this Agreement to the contrary, (i)
Instructivision's grant to Queue of rights to act as exclusive distributor
under paragraph 1, above, shall constitute a grant only of such rights as
Instructivision has to any relevant Product and such grant shall be subject
to any rights of any third parties in and to any such Product, (ii)
Instructivision shall retain all of its royalty rights from, or obligations
to, any third party, including, without limitation, NASSP and Steck-Vaughn,
as to which rights and obligations Queue shall have no claim or responsibilty
and (iii) Instructivision shall be free to subcontract its services and
perform customer service for third parties, without obligation or liability
to Queue.
13. The parties hereto agree that this Agreement shall be governed by,
and interpreted and enforced in accordance with, the laws of Connecticut
applicable to agreements made and to be performed therein.
14. This agreement, with its obligations, duties and/or rights may be
assigned by Instructivision without the consent of Queue, but may not be
assigned by Queue without the consent of Instructivision except in
connection with the sale by Queue of all or substantially all of its
business substantially as an entirety.
15. The invalidity or unenforceability of any term or provision of
this Agreement shall not, to any other extent, make any other term or
provision or the entire Agreement invalid or unenforceable each such other
term and provision of this Agreement shall nonetheless remain valid and
fully enforceable.
16. Any and all changes to this Agreement shall be in writing, shall
be with the unanimous consent of both parties hereto and shall not be
effective unless signed by both parties hereto.
17. This Agreement represents the entire agreement and understanding
by and between Instructivision and Queue with respect to the subject matter
hereof and supersedes any prior agreements or understanding, oral or
written.
Agreed to effective as of the 1st day of October, 1998 by
s/Jonathan Kantrowitz S/ Rosemary Comras
for: Queue, Inc. for: Instructivision, Inc.
Title: Chief Executive officer Title: President
Page 30
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Sep-30-1998
<PERIOD-END> Sep-30-1998
<CASH> 11610
<SECURITIES> 724767
<RECEIVABLES> 375685
<ALLOWANCES> 0
<INVENTORY> 161182
<CURRENT-ASSETS> 1296883
<PP&E> 1589152
<DEPRECIATION> 1359182
<TOTAL-ASSETS> 1765318
<CURRENT-LIABILITIES> 156082
<BONDS> 0
<COMMON> 3350
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1765318
<SALES> 1256463
<TOTAL-REVENUES> 1256463
<CGS> 1032028
<TOTAL-COSTS> 1480290
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2832
<INCOME-PRETAX> (156576)
<INCOME-TAX> 2700
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (159276)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
