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, 1999
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)
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 [ ]
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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 28, 1999, was $629,800
based on the over-the-counter closing bid price of $.188 per share on
December 28, 1999.
The number of shares of Common Stock, .001 par value, of the
Company, issued and outstanding on December 27, 1999 was
3,350,000.
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PART I
ITEM 1. BUSINESS
- ----------------
The Company
- ------------
Instructivision, Inc. (the "Company") is a multimedia publishing
and production company that develops supplemental educational software,
video tapes, and related workbooks for schools, and instructional video
tapes for businesses. Educational products, which accounted for
approximately 48% of the Company's sales in fiscal 1999, are sold to
elementary and high schools throughout the United States to prepare
students for proficiency assessments, high school graduation and college
admissions tests.
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 for employee
orientation videos, medical information, seminar, and special event coverage.
The Company's services include script writing, on-location and
studio recording, digital and analog editing, animation, CD-ROM recording,
duplication and fulfillment services. Corporate video production revenues
accounted for approximately 52% of the Company's sales.
Background
- ----------
The Company, a New Jersey corporation, was founded in 1981 by
Jay Comras and Rosemary Comras to develop multimedia test preparation
for high school students preparing for college entrance tests and state
mandated high school proficiency tests. The Company has since expanded
its product line to include workbooks, computer software and video programs
for 4th through 12th grade students, and instructional video tapes for
teachers, administrators and parents.
Since October 1, 1998, with limited exceptions, the Company's
educational products are being marketed exclusively by Queue, Inc. (see
"Marketing" below).
The Company also produces educational software and textbooks for other
publishers under royalty agreements. Royalties accounted for approximately
18% of revenues in 1999.
The Company's broadcast quality video production studio and post-
production facility was built in 1986 at its present location to produce
educational video tapes, and service corporate customers by producing
videos for employee orientation, safety training, medical applications,
and television commercials.
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's full service video production facility consists
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of a studio, two interformat linear editing suites, one non-linear
editing room, audio recording, animation and graphics equipment. Some of
the company's major commercial customers during the past fiscal year
were Cendant Corporation, Valley National Bank, Prime Hospitality Corp.,
and Brother International.
2. Educational video tapes, software and workbooks:
The Company's software programs are available for Windows and
Macintosh formats, and network file servers, and are shipped on floppy or
CD-ROM disks. Individual products are priced from $89 for single computer
use to $1100 for school site and network licenses. Workbooks are generally
priced from $6.95 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, 1999 were as follows:
HSPA SUCCESS, GEPA SUCCESS, PRE-HSPT, ESPA SUCCESS consist of a series
of software, textbooks and video tapes sold to schools in New Jersey.
The State of New Jersey has since 1986 mandated that all students in public
high schools must pass proficiency tests in core curriculum areas. The
Company introduced its first High School Proficiency test preparation
material in 1987 and has updated and revised the product since then to
conform to changes in test format and types of questions. In 1993 the
middle school test preparation software and print material was added to
the Company's catalog.
In February 1998, the New Jersey Department of Education announced new
tests for 4th (ESPA), 8th (GEPA), and 11th (HSPA) grade students replacing
the current HSPT and EWT in 1999-2000.
The Company completed new text books and software for the Grade Eight
Proficiency Assessment (GEPA) in Mathematics and Language Arts during the
fiscal year ended September 30,1999 and completed its HSPA SUCCESS workbooks
in Mathematics and Language Arts in December 1999. The New Jersey test
preparation materials comprise approximately 30% of the Company's sales.
The Company produces SAT and ACT preparation textbooks, software and
video products which are sold nationally to high schools by the National
Association of Secondary School Principals (NASSP), and Queue, Inc., the
Company's distributor. The first multimedia SAT test preparation video
course produced by the Company was published in 1983 by the NASSP. The
current college test preparation material consists of the following titles:
Improving College Admission Test Scores on the ACT (software), SAT
Excellerator (workbooks and software), ACT Excellerator (workbooks),
SAT EDGE (video course with workbooks), SAT EDGE CD-ROM edition, and
Improving Students' College Admission Test Scores on the SAT and ACT
videos for teachers. The Company receives a royalty of 15 - 33% on NASSP's
gross sales of the Company's products. The Company received approximately
$42,500 in royalties from the NASSP in fiscal 1999. The Company pays the
NASSP a royalty of 15-25% on such products sold by the Company.
In 1995 the Company entered the Florida high school test market
with test preparation material for the Florida HSCT (High School Competency
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Tests). The HSCT SUCCESS series consist of software and textbooks for the
Mathematics and Communications tests. The Company intends to release
test preparation software material for the new FCAT (Florida Comprehensive
Assessment Test) in Mathematics and Language Arts in 2000. The Florida
Department of Education plans to require the new FCAT tests for grades 4 to
10 in place of the HSCT.
The Company publishes a software program, LEAP Success in Mathematics,
for the Louisiana Educational Assessment Program. A software program,
entitled LEAP Success in Language Arts, is scheduled for release in 2000.
Test preparation material for the 4th and 8th grade LEAP tests are
also planned.
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. The Company
also receives income from the video tape The Frog Inside-Out. Revenues
from the sale of educational videotapes were approximately 3% of the
Company's sales in fiscal 1999.
All of the Company's software products are available for Macintosh,
and all Windows formats. Site licenses and networking rights give a
school license to duplicate and network the programs. The Company updates
its various software products from time to time to conform to new hardware,
software access systems, and delivery devices 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 Steck-Vaughn for the fiscal year
ended September 30, 1999 were $119,442.
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
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The Company completes production of most new products over a period of
approximately six to twelve months. The Company's work in progress as of
December 1999 for programs scheduled for completion during the next fiscal
year consists of the following:
a) ESPA SUCCESS workbooks for Language Arts Literacy
b) ESPA SUCCESS software programs for Mathematics and Language Arts test
preparation for Windows, Macintosh and CD-ROM
c) HSPA SUCCESS software for Mathematics and Language Arts Literacy
d) LEAP SUCCESS in Language Arts test preparation software programs for
students taking the Louisiana basic skills tests for 8th and 10th
grades
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e) FCAT SUCCESS in Mathematics and Literature for Windows and Macintosh
f) The Company is in the process of creating a new internet site for the
online sale of a series of mathematics lessons for grades 6-12 on
CD-ROM and DVD disks. These consumer products will be marketed to home
schoolers and parents helping their children prepare for state
proficiency tests. The first series of CD's are scheduled to be
completed in spring 2000.
Future Plans
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The Company intends to expand its list of products to include test
preparation material for Massachusetts, Connecticut, and other states that
require students to pass minimum basic skills tests, and to publish
additional software for the New Jersey schools. The Company frequently
revises and updates its educational products to conform to any changes
in testing standards and formats and replaces those product determined to
be obsolete.
The Company's video production facility offers competitive rates
consistent with the area's market. The Company intends to produce inter-
active programs for DVD players. Management believes that the popularity of
the DVD disks' larger storage capacity and superior picture quality has
created a niche market for DVD programs in schools and industry.
Marketing
- ---------
The Company markets its educational products, with the exception of
the Paterson School District, through its exclusive distributor, Queue Inc.
The Company maintains a description and ordering information of its
products on the Company's internet site, www.instructivision.com.
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 developing programs for other publishers on a royalty
basis. However, revenues from such products will decrease as the products
reach obsolescence.
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'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.
Queue, Inc. warehouses the products and provides technical support and
customer service, and manufactures 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.
The Company advertises its video production services through telephone
directories throughout New Jersey, via the Company's website, and through
direct mailings and telemarketing.
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Seasonality of the Business
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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 7 full-time employees at September 30, 1999.
The Company's full time staff includes video engineers, video editors, a
graphics artist, and administrative personnel. The Company uses outside
performers, writers, artists, software programmers and educators to
produce, edit, and field-test the Company's products. The Company does
not believe that the departure of any particular employee would have a
long term adverse effect on the Company's operations.
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 main-
taining 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.
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
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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.
Some of the Company's video programs are marketed under the trade
name INSERVICE VIDEO NETWORK.
Backlog
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The Company's sales backlog at September 30, 1999 consisted of
contractual video production obligations to be filled over the next
90 days of approximately $75,000.
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, and
Kaplan. These competitors have more industry experience, and larger
manufacturing, marketing, and servicing capabilities than the Company.
There already is a large number of textbooks, software, video and CD-ROM
programs directed at preparing students for the SAT, ACT, and high
school proficiency tests 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 low 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 new applications: CD-ROM, DVD, and the internet.
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, 1999 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
intends to seek smaller office space when the lease expires since it is
outsourcing the storage and distribution of the educational products to
its distributor, Queue, Inc.
ITEM 3. Legal Proceedings
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none
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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
sporadic basis in the over-the-counter market since its initial public
offering in 1985. 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
- ------------------------------ ---- ---
1998
<TABLE>
<S> <C> <C>
First Quarter .25 .15
Second Quarter .25 .15
Third Quarter .25 .15
Fourth Quarter .25 .15
1999
First Quarter .25 .15
Second Quarter .30 .18
Third Quarter .33 .18
Fourth Quarter .35 .18
</TABLE>
At December 27, 1999 management believes that the approximate number
of beneficial holders of the Company's Common Stock was 240. This
number is based upon the Company's stockholder mailing list and information
provided to the Company by investors. At December 27, 1999 the
Company's transfer agent advised that there were 197 holders of record of
the Company's Common Stock. The Company has not paid any dividends on its
Common Stock and does not anticipate paying dividends in the foreseeable
future.
ITEM 6. Management's Discussion and Analysis of Financial Condition
and Results of Operation
- -------------------------------------------------------------------
The Company has been in business for over 18 years creating
multimedia instructional products for schools and businesses.
Total sales for fiscal 1999 were $861,176, a decrease of 31% from
$1,256,463 in the previous year. The decrease in part reflects the
Company's change from selling directly to schools to utilizing a
distributor. In addition, revenues from sale of video services declined
from $906,377 to $444,526 in 1999 due to the loss of a major customer
contract which was completed in September 1998.
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Sales from video production service declined by over 50% in the year
ended September 30, 1999. However, management was not able to reduce the
fixed costs associated with maintaining the video equipment, such as
depreciation, maintenance, and personnel, during the fiscal year.
Operating costs for the video service department were $494,851 on
revenues of $444,526 compared to costs of $740,784 on video sales of
$906,377 in the previous fiscal year.
Accounts receivable were $203,642 and $375,685, respectively, for
the years ended September 30, 1999 and 1998.
General and administrative expenses declined slightly in fiscal 1999
from the previous year. G & A expenses were $446,852 compared to $448,262
in 1998.
The Company is dependent on a limited number of video customers. If any
of these customers delay orders, change management, or cut budgets for
inhouse training, seminars, video newsletters, or purchase their own video
editing equipment, the Company's business could be severely affected. In
fiscal 1999 our three largest corporate video customers accounted for 38%
of video revenues.
The principal factors that could affect our future operating results
are a loss of a major video customer and delay in introducing new school
products when state required proficiency tests are discontinued or
replaced by different test models.
Company has taken steps to reduce production costs by reducing
staffing and will outsource some of its creative services. An aggressive
advertising campaign including telemarketing and mailings to local small
and medium size businesses to promote the Company's new website development
services is expected to help improve sales and profit margins in the
second quarter of the new fiscal year.
The Company invests its cash principally in equity and mutual funds.
At December 22, 1999 the portfolio had a market value of approximately
$813,000.
Cash provided by operating activities will continue to be the primary
source of operating funds. The Company utilizes income from its securities
portfolio for operating expenses, when necessary, and capital equipment
purchases.
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.
The Company's current line of software products are Y2K compliant.
The Company's accounting system was upgraded and tested prior to
September 30, 1999 and is Y2K ready. The Company's administrative
systems: alarm, postage meter, video editing interface, were tested and
found Y2K ready.
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ITEM 7. Financial Statements and Supplementary Data
- ----------------------------------------------------
See attached Financial Statements.
ITEM 8. Disagreements on Accounting and Financial Disclosure
- ------------------------------------------------------------
None
PART III
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ITEM 9. Directors and Executive Officers of Registrant
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The executive officer and directors of the Company, and further
information concerning them, are as follows:
Rosemary Comras 59 President, Secretary/Treasurer and Director
Marcus Ruger 68 Director
Dale Spaulding 59 Director
David Sousa 60 Director
Rosemary Comras, co-founder of the Company, was elected President
of the Company on March 1996 and Chairman and Chief Executive Officer
on September 4, 1996 following the death of Jay Comras. Ms. Comras
previously was Vice President, Secretary/Treasurer and a director of the
Company since its inception in 1981. Ms. Comras, a graduate from Fairleigh
Dickinson University, was employed as Accounting Manager at Telesciences
Computer Systems Inc. prior to starting the Company.
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 provides consulting services to schools, and is
the author of "How the Brain Learns" and other publications. 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 on April 23, 1998. Dr.
Spaulding was previously 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 International 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.
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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,
President, and Chief Executive Officer, during the previous two fiscal
years. There are no executive officers of the Company for whom the
total annual salary and bonus exceeds $100,000.
<TABLE>
Fiscal Salary Other
year Compensation(1)
- ------------- ------ --------- ---------------
<S> <C> <C> <C>
Rosemary Comras, 1998 $82,027 $ 3,900
Chairman, 1999 83,005 3,900
President and CEO
</TABLE>
(1) Compensation consists of reimbursement of health insurance premiums.
The Company has a three year employment agreement commencing
September 1,1996, with Rosemary Comras, President and Secretary/Treasurer
of the Company, renewable annually, at a current salary of $83,000/yr.
and 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
are eligible to receive Company paid health insurance. 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 a compensation of $500 for each board
meeting attended 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
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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 1,120,000 33%
Rosemary Comras 975,000 29%
ITF Kevin Comras and
JoAnn Doniloski
Marcus Ruger -- --
Dale Spaulding -- --
David Sousa 6,000 less than 1%
- ----------------------------------------------------------------------
All officers and directors
as a group (4 persons) 2,101,000 62%
</TABLE>
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)
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<PAGE>
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 (Achievement 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)
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 with Form 10-KSB on December 30, 1998
Page 14
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Instructivision, Inc.
We have audited the accompanying balance sheet of Instructivision,
Inc. as of September 30, 1999, and the related statements of operations,
stockholders' equity and cash flows for the years ended September 30,
1999 and 1998. 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, 1999, and the results of its
operations and its cash flows for the years ended September 30, 1999,
and 1998 in conformity with generally accepted accounting principles.
STANLEY J. MORIN & ASSOCIATES, P.C.
Cedar Knolls, New Jersey
December 22, 1999
Page 15
<PAGE>
<TABLE>
<CAPTION>
INSTRUCTIVISION, INC.
BALANCE SHEET
September 30, 1999
1999
-----------
<S> <C>
Current assets
Cash $ 1,241
Accounts receivable 203,642
Investments 694,121
Inventory 168,582
Prepaid expenses 17,529
-----------
Total current assets 1,085,115
Property and equipment at cost, less
accumulated depreciation 162,789
Other assets
Capitalized software - net of amortization 193,441
Deposits 13,125
Deferred income taxes 31,000
-----------
Total other assets 237,566
-----------
Total assets $1,485,470
===========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
<S> <C>
Current liabilities
Accounts payable $ 54,105
Accrued expenses 25,739
Note payable 6,041
Deferred income taxes 31,000
-----------
Total current liabilities 116,885
-----------
Total liabilities 116,885
-----------
Stockholders' 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 (106,277)
Unrealized gain on investment -net of income tax 46,294
-----------
Total stockholders' equity 1,368,585
-----------
Total liabilities and stockholders' equity $1,485,470
===========
</TABLE>
[FN]
See accompanying notes to financial statements
Page 16
<PAGE>
<TABLE>
<CAPTION>
INSTRUCTIVISION, INC.
STATEMENT OF OPERATIONS
For each of the Two Years ended September 30, 1999
1999 1998
---------- ----------
Revenues
<S> <C> <C>
Net sales: Products $ 416,650 $ 350,086
Services 444,526 906,377
_________ _________
Total revenues 861,176 1,256,463
Costs and expenses
Cost of sales
Products 232,460 291,243
Services 494,851 740,785
----------- -----------
Total cost of sales 727,311 1,032,028
General and administrative expenses 446,852 448,262
Interest expense 1,190 2,832
Investment income (71,364) (70,083)
----------- -----------
Loss before income taxes (242,813) (156,576)
Provision for income taxes 26,200 2,700
----------- -----------
Net income (loss) $ (269,013) $ (159,276)
=========== ===========
Loss per share (.08) (.05)
=========== ===========
</TABLE>
[FN]
See accompanying notes to financial statements
Page 17
<PAGE>
<TABLE>
<CAPTION>
INSTRUCTIVISION, INC.
STATEMENT OF STOCKHOLDERS' EQUITY
For the Two Years Ended September 30, 1999
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.30,1997 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
Net loss
for year -- -- -- (269,013) 35,046 (233,967)
--------- ------ ---------- --------- -------- -----------
Balance
Sept.30,99 3,350,000 $3,350 $1,425,218 (106,277) 46,294 1,368,585
========= ====== ========== ========= ======== ===========
</TABLE>
[FN]
See accompanying notes to financial statements
Page 18
<PAGE>
<TABLE>
<CAPTION>
INSTRUCTIVISION, INC.
STATEMENT OF CASH FLOWS
For each of the Two Years Ended September 30, 1999
1999 1998
----------- -----------
<S> <C> <C>
Operating activities:
Net income (loss) $ (269,013) $ (159,276)
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation 83,127 124,915
Amortization of capitalized software 69,444 57,443
Loss (Gain) on sale of investment securities 4,408 (16,288)
Deferred income taxes 26,000 (19,000)
Changes in operating assets and liabilities:
(In)decrease in accounts receivable 172,043 (18,849)
(In)decrease in inventory and prepaid expenses (8,790) 28,032
Decrease in accounts payable and
accrued expenses (61,437) (3,425)
----------- ----------
Net cash provided (utilized) by operating
activities 15,782 (6,448)
Investing Activities:
Additions to capitalized software (87,045) (52,421)
Purchases of property, plant and equipment (15,946) (65,646)
Purchases of investments (508,006) (37,295)
Sales of investments 592,790 201,679
----------- -----------
Net cash provided (utilized) in investing
activities (18,207) 46,317
Financing activities:
Principal payment on credit lines, notes
payable and capital lease obligations (7,944) (29,896)
----------- -----------
Net cash (utilized) provided by
financing activities (7,944) (29,896)
(De)increase in cash (10,369) 9,973
Cash at beginning of year 11,610 1,637
----------- -----------
Cash at end of year $ 1,241 $ 11,610
=========== ===========
<CAPTION>
Supplemental disclosure of cash flow information:
1999 1998
------- --------
Cash paid during the year for
<S> <C> <C>
Interest $1,190 $ 2,832
Income taxes 200 150
</TABLE>
[FN]
See accompanying notes to financial statements
Page 19
<PAGE>
INSTRUCTIVISION, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 1999
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 1999, and 1998 and have
been expensed.
Page 20
<PAGE>
INSTRUCTIVISION INC.
NOTES TO FINANCIAL STATEMENT--(Continued)
September 30, 1999
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 earnings per share was
3,350,000 for each of the years ended September 30, 1999 and 1998. 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. Investments
At September 30, 1999, 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, 1999:
[CAPTION]
Market Cost Unrealized
Value Gain
---------- --------- ----------
[S] [C] [C] [C]
Various investments $ 694,121 $ 616,827 $ 77,294
Included in shareholders' equity at September 30, 1999 is $46,294
of unrealized gains on marketable securities available for sale, net of
income tax of $31,000. The cost basis of securities sold is determined
by using specific identification.
NOTE 4. Inventory
The components of inventory at September 30, 1999 are as follows:
<TABLE>
1999
---------
<S> <C>
Work in process (video production cost) $ 1,523
Finished goods (video) 105,767
Finished goods (workbooks) 61,292
---------
$ 168,582
=========
</TABLE>
Page 21
<PAGE>
INSTRUCTIVISION, INC
NOTES TO FINANCIAL STATEMENTS --(Continued)
September 30, 1999
NOTE 5. Property and Equipment
At September 30, 1999 property and equipment is comprised of the
following:
<TABLE>
Life (yrs) 1999
----------- ----------
<S> <C> <C>
Furniture and fixtures 3 - 8 $ 65,834
Video equipment and computers 3 - 10 1,357,017
Automobile 3 51,552
Leasehold improvements 5 - 10 109,520
-----------
1,583,923
Less accumulated depreciation 1,421,134
-----------
Net $ 162,789
===========
</TABLE>
NOTE 6. Capitalized Software
For the year ended September 30, 1999 accumulated amortization
of costs related to computer software products held for sale was
$345,897.
NOTE 7. Note Payable
Note payable at September 30, 1999 consisted of the following:
<TABLE>
1999
----------
<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 $ 6,041
=========
</TABLE>
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, 1999 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.
Page 22
<PAGE>
INSTRUCTIVISION, INC.
NOTES TO FINANCIAL STATEMENTS --continued
September 30, 1999
NOTE 9. Income Taxes
Significant components of the Company's deferred income tax
liabilities and assets as of September 30, 1999 are as follows:
<TABLE>
1999
----------
<S> <C>
Deferred tax liabilities :
Depreciation $ 32,000
Unrealized gain on investments 31,000
---------
Total 63,000
Deferred tax assets:
Net operating loss carryforwards 357,100
Tax credit carryforwards 35,000
Alternate minimum tax paid credit 40,000
Valuation allowance (369,100)
---------
Total 63,000
---------
Net deferred tax assets $ 0
=========
</TABLE>
The valuation allowance for deferred tax assets was decreased by
$45,000 for the year ended September 30, 1999 due to the expectation of
Federal and State net operating carryforwards expiring unused.
Significant components of the provision for income taxes are as follows:
<TABLE>
1999
_________
<S> <C>
Current:
Federal $ --
State 200
--------
Total current 200
Deferred:
Federal 19,000
State 7,000
--------
Total deferred 26,000
--------
Total income tax expense $ 26,200
========
The reconciliation of income tax from continuing operations
computed at statutory rates to the Company's effective tax rate is
as follows:
Page 23
<PAGE>
<CAPTION>
INSTRUCTIVISION, INC.
NOTES TO FINANCIAL STATEMENTS --continued
September 30, 1999
</TABLE>
<TABLE>
1999
------
<S> <C>
Statutory rate (30)%
State income tax ( 9)
Net operating loss 40
Changes in valuation allowance 8
-----
Total 9 %
=====
</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
2011 266,000 -- 278,000
--------- ---------- ---------
$ 952,000 $ 35,000 $ 586,000
========= ========== =========
</TABLE>
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 $154,949 in 1999 and $148,193 in 1998,
respectively. Future minimum rental commitments, not including escalation
on certain contingent expenses, for the years ended September 30th,
are as follows:
2000 109,605
2001 82,204
Page 24
<PAGE>
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.
SIGNATURES
Pursuant to the requirements 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, 1999 s/Rosemary Comras
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
- ------------------- ------------------ ----------
[S] [C] [C]
Rosemary Comras President, Secretary/Treasurer 12/30/99
Marcus Ruger Director 12/30/99
Dale Spaulding Director 12/30/99
David Sousa Director 12/30/99
Page 25
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> Sep-30-1999
<PERIOD-END> Sep-30-1999
<CASH> 1241
<SECURITIES> 694121
<RECEIVABLES> 203642
<ALLOWANCES> 0
<INVENTORY> 168582
<CURRENT-ASSETS> 1085115
<PP&E> 1583923
<DEPRECIATION> 1421134
<TOTAL-ASSETS> 1485470
<CURRENT-LIABILITIES> 116885
<BONDS> 0
<COMMON> 3350
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 1485470
<SALES> 861176
<TOTAL-REVENUES> 932540
<CGS> 727311
<TOTAL-COSTS> 1174163
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1190
<INCOME-PRETAX> (242813)
<INCOME-TAX> 26200
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (269013)
<EPS-BASIC> (.08)
<EPS-DILUTED> (.08)
</TABLE>
