-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PFN/Bli1zK5d//kbTZsKXG1cvDgJoS7iLnED+3AOzz6WJzM3HvdU+ym78Jmrv3BC zrHBSUzZCCCR3BFeZps4kQ== 0000891554-98-000491.txt : 19980504 0000891554-98-000491.hdr.sgml : 19980504 ACCESSION NUMBER: 0000891554-98-000491 CONFORMED SUBMISSION TYPE: 10KSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980131 FILED AS OF DATE: 19980430 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MULTI SOLUTIONS INC CENTRAL INDEX KEY: 0000723733 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 222418056 STATE OF INCORPORATION: NJ FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 10KSB SEC ACT: SEC FILE NUMBER: 000-12162 FILM NUMBER: 98606012 BUSINESS ADDRESS: STREET 1: 4262 US ROUTE 1 STREET 2: SUITE 2 CITY: MONMOUTH JUNCTION STATE: NJ ZIP: 08852 BUSINESS PHONE: 9083299200 MAIL ADDRESS: STREET 1: 4262 US HIGHWAY 1 STREET 2: SUITE 2 CITY: MONMOUTH JUNCTION STATE: NJ ZIP: 08852-1905 10KSB 1 ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-KSB [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED] For the fiscal year ended January 31, 1998 Commission File No. 0-12162 New Jersey 22-2418056 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) MULTI SOLUTIONS, INC (Name of Small business issuer in its charter) 4262 US Route 1, Monmouth Junction, New Jersey 08852 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (732) 329-9200 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act, during the past 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes |X| No |_| Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B contained in this form, and no disclosure will be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-KSB or any amendment to this Form 10-KSB.[X] Issuer consolidated revenue for the fiscal year: $901,450. The aggregate market value of the voting stock held by non-affiliates (1) of the registrant based on the average ask ($.36) and ($.33) bid price of such stock, as of April 21, 1998 is $4,120,418 based upon $.345 multiplied by the 11,943,241 Shares of Registrant's Common Stock held by non-affiliates. The number of shares outstanding of each of the registrant's classes of common stock, as of April 21, 1998, is 18,266,898 shares, all of one class of $.001 par value Common Stock. (1) Affiliates for purposes of this item refers to those persons who, during the preceding 3 months, were officers, directors and/or owners of 5% or more of the Company's outstanding stock. DOCUMENTS INCORPORATED BY REFERENCE: None Transitional Small Business Disclosure Format (check one): Yes |_| No |X| 1 MULTI SOLUTIONS, INC. Form 10-KSB Year Ended January 31, 1998 Table of Contents
Page ---- PART I....................................................................................................................3 Item 1. Business.........................................................................................................3 Item 2. Properties.......................................................................................................8 Item 3. Legal Proceedings................................................................................................8 Item 4. Submission of Matters to a Vote of Security Holders..............................................................8 PART II...................................................................................................................9 Item 5. Market for Registrant's Common Equity and Related Stockholder Matters...........................................9 Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................10 Item 7. Financial Statements............................................................................................12 Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures...........................12 PART III.................................................................................................................13 Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act...............................................................13 Item 10. Executive Compensation..........................................................................................15 Item 11. Security Ownership of Certain Beneficial Owners and Management..................................................17 Item 12. Certain Relationships and Related Transactions..................................................................18 PART IV..................................................................................................................19 Item 13. Exhibits and Reports on Form 8-K................................................................................19 SIGNATURES...............................................................................................................21 Financial Statements.....................................................................................................F1
2 PART I Item 1. Business. General During the fiscal year ended January 31, 1998, Multi Solutions, Inc. (the "Company" or "Multi Solutions") was relatively inactive, its primary activity being the support of its subsidiary, Multi Soft, Inc. ("Multi Soft"). The business of Multi Soft is discussed below. BUSINESS OF MULTI SOFT Multi Soft, Inc. (or "Multi Soft") was incorporated in January 1985 as a wholly owned subsidiary of Multi Solutions, Inc. ("MSI") and, as of the date hereof, is a 55.4% owned subsidiary of the Company. Multi Soft engages in the production, marketing and maintenance of communications front-ending, client-server and cooperative processing technologies called The Windows Communications Library(TM) (WCL(TM)) for Windows and INFRONT and QuickFRONT For DOS. The Technology The Multi Soft product line consists of tools for the development of client-server applications using the mainframe as the Enterprise Server. There are four key elements to the real world development, delivery and production maintenance of these applications, and all are supported by the Multi Soft product line. These include screen-based access to mainframe data and processes; message-based access to mainframe data and processes; integration of screen-based and message-based access to the mainframe in the same application; and control and distribution management. Screen-based access to Mainframe Data and Processes (which includes front-ending) allows the user to enhance existing mainframe applications through the integration of client technologies such as GUIs (graphical user interfaces), imaging and local data, without changing any mainframe code. This allows companies to leverage their PC capabilities to streamline user processes and for presenting mainframe data to users in a way that is intuitive, easy to use and productive. Screen-based access to the mainframe is supported by WCL, QuickFRONT and INFRONT. Message-based access to Mainframe Data and Processes allows companies to create client-server applications, where the PC is used for the client portion of the application (i.e., all user interaction, dialogue flow and access to local data) and the mainframe is used for the server portion of the application (i.e., management of database interaction, data integrity and security). In this architecture, only data and messages are passed between the PC and host, which results in a streamlined and optimized production application. Message-based access to the mainframe is supported by WCL's WCL/Enterprise Server Option ("WCL/ESO"), and by INFRONT's and QuickFRONT's Host Processing Option ("HPO"). Integrity Control and Distribution Management allows companies to use the mainframe system to centrally manage the integrity of the work station logic and distribute new version releases. In production client-server applications it is important to ensure that the programs, files and data residing on the PC are correct before the user starts the application. When changes are made to the work station logic, the host can also be used to manage the distribution of these changes. Integrity control and distribution management is supported by WCL's WCL/Software Distribution Option ("WCL/SDO") and by INFRONT's and QuickFRONT's Software Distribution Facility ("SDF"). 3 The Multi Soft Product Line The Multi Soft Product line consists of two product sets: the WCL product set and the INFRONT/QuickFRONT product set. The WCL product set is an open environment that runs under Windows and includes WCL, WCL/ESO and WCL/SDO. The INFRONT and QuickFRONT product set is an integrated environment that runs under DOS and Windows. It includes INFRONT, QuickFRONT, HPO and SDF. WCL/COM(TM), is a new component based development tool slated for production release in July 1998. It takes advantage of Microsoft's COM/DCOM technology and will generate both components and complete applications, not just applications as currently done by WCL. WCL/COM will allow you to build client server applications today and use the same code for your Internet/Intranet applications tomorrow. The components generated by WCL/COM that interface with the mainframe can be used both by Visual Basic and the your Internet browsers, on individual workstations or Windows NT servers, depending on the needs of your application. Persistence and security are achieved through the use of Microsoft's Internet Information Server (IIS) and Active Server Pages (ASP). WCL is a toolkit and a set of DLLs (Dynamic Linked Libraries) that work in conjunction with Windows 3270 emulation products to provide easy integration of data and processing between PC/LANs (local area networks) and the mainframe. Because WCL is open, any of the standard Windows development tools such as PowerBuilder, Visual Basic, and C++, can be used with WCL to create the client application. It supports the development of GUI front-ends, client-server applications that use the mainframe as a server and integrity control and distribution management. The WCL toolkit provides an automated development environment that includes, among other things, a screen capture mechanism, a screen maintenance and a screen matching facility. In addition, it provides code generation to remove the complexity and development effort associated with building GUI front-end applications. Multi Soft also has a 32 bit version of its WCL product for Windows 95 and Windows NT. DynaGUI is an automted sub product of WCL which can be sold as a stand-alone application tool. DynaGUI (Dynamic Graphical User Interface generation) is a fully automatic runtime utility which dynamically converts 3270 or 5250 legacy emulation screens into Windows GUI screens, with absolutely no programming or maintenance. It uses advanced pattern recognition to interpret host attributes and automatically converts them into Windows controls. And, it allows a non-programmer to quickly and easily add screen & field-level help in minutes. WCL/ESO is the host component to WCL and provides a message-based transport layer between client PC/LANs and the mainframe. The client application is created using any of the standard Windows tools and products, and the server application is created using a standard language, such as COBOL. Any mainframe file structure or database, such as VSAM, DB2, or IMS, can be accessed using WCL/ESO through CICS (an IBM mainframe operating environment). Client-server applications developed using WCL/ESO have the added advantage of using a company's existing mainframe skills and infrastructure, including security, data integrity, backup and recovery and disaster recovery. WCL/SDO is a WCL/ESO application created for the centralized control and management of application code, data and software for distributed client-server applications. It allows companies to control, audit and distribute from central host-based master libraries to distributed PCs. These PCs can be clients and/or servers. WCL/SDO is used as a verification mechanism to ensure all files, and appropriate versions of files are present on a PC or in a host library. It will automatically update the PC or Host with correct versions of files if any are found to be missing or invalid. This facility is important for the successful production management of large-scale distributed applications. 4 QuickFRONT is a powerful, but easy to use, tool which offers the ability to rapidly improve existing mainframe applications by creating new PC-based interfaces for them. This can be accomplished without programming, without training, without any significant learning curve and without any changes to the mainframe code. If the user needs special functions that are not generated automatically through QuickFRONT's dialogues, the user also has access to a powerful 4GL (fourth generation language) called CPL/1. QuickFRONT is designed to give the user the maximum benefit from front-ending with maximum investment from both a development resource and software expenditure standpoint. INFRONT is a comprehensive and integrated development environment for building PC front-ends and client-server applications with the mainframe. The development environment includes: an intelligent forms subsystem with screen capture, screen painting, editing and validation assignment facilities, data dictionary; a 4GL; an intelligent editor with language templates and reusable code library; a PC-resident database, including database maintenance facilities such as sorting and reorganizing; sophisticated debugging facilities, including a source-level language debugger, and other utilities such as code libraries and forms libraries. HPO (Host Processing Option) is the host component to QuickFRONT and INFRONT that supports the development of client-server applications using the mainframe as a server. HPO is also used to incrementally migrate legacy systems into a client-server architecture. It uses a message-based protocol for peer-to-peer interaction between PC/LANs and host systems. HPO delivers the capabilities of APPC and LU6.2 (communications protocols) over the user's existing LU2 and asynchronous networks without requiring any upgrades. HPO allows the user to offload 60% to 80% of an application's logic to the client, thereby reducing the mainframe to the role of a server. SDF (Software Distribution Facility) is a client-server application based on HPO. It is a utility for the centralized, host-based management of work station integrity and the automated distribution of updates and new versions of PC software, files and data. With SDF a master production library of all PC programs, files and data is stored on the host. As a user logs on to the system, SDF can automatically check to see if the programs, files and data on the work station are correct according to the master library on the host. If they are not correct, SDF will automatically download the correct versions before the application is started. If they are correct, the application proceeds immediately. Key Services Multi Soft offers training and consulting services designed to help its new customers get a fast start in client\server development and to help existing customers with additional resources to facilitate successful production application roll-outs. Training Services include basic and advanced product training, as well as courses such as "Design and Development Methodologies," which covers the major issues companies need to understand for successfully developing applications running on distributed platforms. 5 Consulting Services range from human factors design and project management to assisting licensees with application development and/or the development of complete applications. Technical Support Services include a telephone hotline, fax, email, and Internet support, staffed by knowledgeable personnel trained and experienced with the Multi Soft product line. Amortization of software over the last two years were $258,582 in fiscal 1998 and $344,588 in 1997. Clients Multi Soft's past and current client base spans over 40,000 users throughout approximately 125 Fortune 500 companies. Customers that have licensed Multi Soft's products include: American Cyanamid, Bell Atlantic, ITT Hartford, Honda, Con Edison, Hoescht, American International Group, Ciba Geigy, Comdisco, EDS, Exxon, General Electric, Hilton, Lever Brothers, Teachers Insurance, Chicago Northwestern and US West Business. In-House Marketing and Sales In addition to their management responsibilities, Charles Lombardo and Miriam Jarney also are active in sales and marketing. At present, in-house sales are generally made through telemarketing. If Multi Soft obtains additional funds from operations or otherwise, it plans to further market its products through advertisements in trade publications and targeted mailings. No assurance can be given that Multi Soft will have sufficient funds to increase its in-house sales and marketing activities. Distributors To supplement its domestic sales and marketing efforts, Multi Soft has built an international distribution network. Business arrangements have been established with software distributors in European markets. These organizations include: SEE Software Engineering (Switzerland) and Software Engineering (Holland, Germany, UK). Strategic Alliances Multi Soft has established strategic relationships with complementary hardware and software vendors. Most notable among these are the relationships with IBM (see "IBM" below) and Computer Data Systems, Inc. ("CDSI"). CDSI, a supplier of financial systems and consulting services to the government market place, licenses Multi Soft products into its existing customer base and to new clients. IBM In October 1993, Multi Soft entered into a Software Licensing Agreement ("SLA") and other ancillary agreements with IBM Corporation ("IBM") providing IBM with certain exclusive marketing rights for Multi Soft's flagship product, WCL (runtime version) with IBM IMS Extensions. This IBM EXTENDED VERSION of Multi Soft's WCL is named IMS Client Server(TM) for Windows. Specifically modified for use with IBM mainframe systems, IMS Client Server(TM) for Windows provides remote presentation support for IMS. The IBM agreement, effective for a term of seven years with automatic renewals for two more one year periods, provides for the payment of percentage royalties and unit royalties as specified in the agreement. The Agreement is terminable by IBM upon 90 days notice. Multi Soft has been receiving monthly maintenance from the above contract. 6 Multi Soft and IBM also have entered into International Marketing Agreements to market Multi Soft's WCL Toolkit under the name IMS Client Server Toolkit(TM) for Windows in the United States, Puerto Rico, the Asian Pacific Region, Europe, the Middle East, Africa and Canada. IMS Client Server Toolkit(TM) facilitates the generation of client application which run with IMS Client Server(TM) for Windows. In addition, in September 1994, Multi Soft entered into an International Software Licensing Agreement with IBM's Personal Communications 3270 division ("P-Comm"). This agreement allows IBM to logo and market a P-Comm specific version of both the Toolkit and Runtime of Multi Soft's WCL. Pursuant to this agreement, Multi Soft will receive a minimum of $75,000 per quarter over a two year period representing minimum advances against royalties. This IBM agreement is effective for a term of two years and is renewable by IBM for two more one year periods. The Agreement is terminable by Multi Soft or IBM upon 90 days notice in the event of a default by the other party. The contract has been renewed for two years paying Multi Soft a minimum monthly maintenance and royalty fees. As of the date of this filing, the above contract remains in effect. Management believes, but cannot assure, that these marketing and distribution agreements will provide Multi Soft with a significant presence in the marketplace, enhance the visibility and credibility of Multi Soft, and result in increased sales of Multi Soft's products by Multi Soft and its existing distributors. Since fiscal 1994, IBM has represented a significant percentage of Multi Soft's revenues See "Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations". Bellcore In 1995 Multi Soft, entered a joint development and marketing agreement with Bellcore to develop and market a Sun Solaris Unix version of its WCL product. The agreement provides that Bellcore pay Multi Soft for developing an extension of its WCL product to the Sun Solaris Unix environment. Also, it provides for a joint marketing agreement in which both companies will share marketing royalties. Multi Soft received maintenance for the above contract during fiscal 1997. During fiscal 1998, Multi Soft did not receive maintenance fees from this contract. Employees The Company only has two employees, its officers: Charles J. Lombardo and Miriam Jarney. Employees of Multi Soft devote such time as is necessary to the Company's business. Multi Soft has twelve employees and consultants, including two officers, three support personnel, four technical and engineering, and three administrative/secretarial personnel. Competition Multi Soft operates in a business composed of strong competitors, many of whom have substantially greater resources, are better established, and have a longer history of operations than Multi Soft. In addition, many competitors have more extensive facilities than those which now or in the foreseeable future will become available to Multi Soft. Multi Soft competes directly with computer manufacturers, large computer service companies and independent software suppliers. Multi Soft believes that hundreds of firms that manufacture software applications products are significant competitors, and Multi Soft is one of the smaller entities in the field. 7 Multi Soft's products provide front-ending, client-server and cooperative processing technologies which Multi Soft believes represent a advance over other products being marketed. NetCast, Inc. is a subsidiary company and was incorporated in April of 1996. It is in the business of developing new Internet technologies to create a series of products and businesses that will extend the power of advertising on the Internet. The Company currently owns 75% of NetCast. Multi Soft provides services and office space to NetCast at cost for which it has billed approximately $155,251. The Board of Directors consists of two officers, Charles Lombardo and Miriam Jarney. NetCast is in the process of raising private funding for its operations. However, no assurance can be made that it will obtain the funding necessary to bring its software to the marketplace. Item 2. Properties The Company uses Multi Soft's facilities, at no charge, consisting of approximately 3,300 square feet of office space at 4262 US Route 1, Monmouth Junction, New Jersey 08852, which Multi Soft leases from C&S Consulting, Inc., a company owned by Multi Soft's Chairman and his wife. C&S Consulting, Inc. leases the space from an unaffiliated party. The lease commenced on December 1, 1993 and is terminable at any time on three months notice. Monthly rent is $3,750 during the first year, $4,250 during the second year, $4,750 during the third year and $4,950 during the fourth year, and $5,200 during the fifth year. Multi Soft is responsible for all utilities. Item 3. Legal Proceedings. The Company is not presently a party to any material litigation. However, The Company and Multi Soft have been, from time to time, parties to legal actions arising in the normal course of their business. In the opinion of management, the disposition of these actions will not have a material effect on the financial position or results of operations of The Company taken as a whole. In May 1997, a lawsuit was commenced against NetCast in the Superior Court of New Jersey by former consultants for approximately $113,000 for services rendered. The Company has accrued $24,000 for services rendered prior to commencement of the action. The Company contests the claim and contends that no services were rendered nor product delivered. Also, The Company intends to vigorously defend the lawsuit and has made counterclaims. Tax Liens Certain State taxes, interest, and penalties aggregating $33,000 remained unpaid at January 31, 1998. In March 1998, approximately $21,000 of the unpaid amount was paid in connection with a settlement agreement leaving approximately $12,000 unpaid. Item 4. Submission of Matters to a Vote of Security Holders. No matters were submitted to a vote of Security Holders in the last quarter of the Company's fiscal year ended January 31, 1998. 8 PART II Item 5. Market for Registrant's Common Equity and Related Stockholder Matters. (a) Market Information -- The Company's Common Stock, Class A Warrants (for one share of Common Stock and one Class B Warrant), Class B Warrants (for one share of Common Stock), and Class C Redeemable Warrants (for one share of Common Stock) are traded in the over-the-counter market, and are quoted on The OTC Bulletin Board (symbol: "MULT"). The following tables set forth the range of high and low bid prices for the Company's Common Stock on a quarterly basis for the past two fiscal years as reported by the National Quotation Bureau (which reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions). The Warrants are unpriced. Bid Prices ---------- Period - Fiscal Year 1997 High Low -------------------------------------------- ------------------------ First Quarter ending April 30, 1996 .38 .35 Second Quarter ending July 31, 1996 .39 .27 Third Quarter ending October 31, 1996 .26 .25 Fourth Quarter ending January 31, 1997 .18 .15 Period - Fiscal Year 1997 High Low -------------------------------------------- ------------------------ First Quarter ending April 30, 1997 .245 .10 Second Quarter ending July 31, 1997 .35 .10 Third Quarter ending October 31, 1997 .35 .13 Fourth Quarter ending January 31, 1998 .13 .055 (b) Holders -- There were approximately 823 holders of record of the Company's Common Stock, 186 holders of record of the Class A Warrants, 1 holder of record of the Class B Warrants and 50 holders of record of the Class C Warrants as of March 9, 1998, inclusive of those brokerage firms and/or clearing houses holding the Company's securities for their clientele (with each such brokerage house and/or clearing house being considered as one holder). (c) Dividends -- The Company has not paid or declared any dividends upon its Common Stock since its inception and, by reason of its present financial status and its contemplated financial requirements, does not contemplate or anticipate paying any dividends upon its Common Stock in the foreseeable future. 9
Issuances of Common Stock ================================ ============================= ============================= Name Date Number of Securities Issued ================================ ============================= ============================= Charles J. Lombardo 1/16/96 1,000,000 - -------------------------------- ----------------------------- ----------------------------- Miriam G. Jarney 1/16/96 1,000,000 - -------------------------------- ----------------------------- ----------------------------- Michael Zindler 4/2/96 25,000 - -------------------------------- ----------------------------- ----------------------------- John Lowy 4/2/96 75,000 - -------------------------------- ----------------------------- ----------------------------- Linda Dorrian 5/6/96 20,000 - -------------------------------- ----------------------------- ----------------------------- Kip R. Marshall 9/9/97 50,000 - -------------------------------- ----------------------------- ----------------------------- Scott F. Orton 9/9/97 50,000 - -------------------------------- ----------------------------- ----------------------------- Bernard M. Deutsch 9/9/97 50,000 - -------------------------------- ----------------------------- ----------------------------- Jerome Feldman 9/9/97 100,000 - -------------------------------- ----------------------------- -----------------------------
Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Fiscal Year Ended January 31, 1998 Compared to Fiscal Year Ended January 31, 1997 Revenues for the fiscal year ended January 31, 1998 were $901,450 as compared to $1,065,135 in fiscal year 1997, a decrease of $163,645 (15%). This decrease is primarily due to a 47% decrease in revenues from license fees from $356,494 to $243,146, much of which come from the companies largest customers. Primary reason for this decrease is that there were no royalty advances paid to Multi Soft during this fiscal year. In fiscal 1998 and 1997, Multi Soft's two principal sources of revenues were license fees and maintenance fees which represented approximately 98.5% ($888,411) and 98.1% ($1,045,186) percent of revenues, respectively. Management believes that the decrease in maintenance fees during the year ended January 31, 1998 is due to the cancellation of maintenance contracts with customers. Also, since November, 1996 the minimum maintenance has been $15,000 per month from IBM. Operating expenses decreased 22% from fiscal 1997 ($1,162,470) to fiscal 1998 ($895,749) primarily as a result of a decrease in software development costs. The decrease in software development costs is principally due to a new product that was capitalized in fiscal 1998 but remained unamortized because it was not ready for sale. Other income (expenses) changed from $101,244 in fiscal 1997 to ($804) in fiscal 1998. Also, for fiscal 1997, $30,000 included in other income consists of forgone deferred compensation by an officer of the company. Also, $55,349 of other income in fiscal 1997 consists of rent revenue and consulting fees. As a result of the foregoing, Multi Solution's earned net income in fiscal 1998 of $4,897 compared to its net income in 1997 of $3,909. 10 Major Customers In fiscal 1998, IBM accounted for 29% of total revenues. In fiscal 1997, IBM accounted for 29% of total revenues. Liquidity and Capital Resources At January 31, 1998, the Company had a working capital deficiency of ($483,700) and has experienced cash flow problems. Management of Multi Soft continues to take various steps to correct this situation. Overhead costs have been cut drastically as a result of staff reductions and curtailment of all outside marketing and advertising costs. In addition, senior staff salaries were reduced and executive officers' salaries were partly deferred. Secondly, Multi Soft broadened its product base into the Windows environment and has made its Windows based products easier to learn and use. It is Multi Soft's intent to remain a technology provider and search out multiple distribution channels, with increasing focus on the use of the Internet, rather than to try and grow via an expensive direct sales force. This allows the focus to stay on technology, with a low overhead cost for each distribution channel used. However, if Multi Soft obtains additional funds from operations or otherwise, it plans to expand in-house marketing activities by advertising in trade publications and by conducting targeted mailing. (See "Item 1. Business - In-House Marketing and Sales"). Working Capital and Current Ratios were: Descriptions January 31, 1998 January 31, 1997 ----------------------------------------------------------------------- Working capital (deficiency) ($483,700) ($470,055) Current ratios .18:1 .088:1 Dividend Policy The Company has not declared or paid any dividends on its common stock since its inception and does not anticipate the declaration or payment of cash dividends in the foreseeable future. The Company intends to retain earnings, if any, to finance the development and expansion of its business. Future dividend policy will be subject to the discretion of the Board of Directors and will be contingent upon future earnings, if any, the Company's financial condition, capital requirements, general business conditions and other factors. Therefore, there can be no assurance that dividends of any kind will ever be paid. Year 2000 Many companies systems experience problems handling dates beyond the year 1999. The Company's products are not directly impacted by this problem. 11 In particular, Year 2000 issues are transparent to WCL. WCL simply transports data between the 3270/5250 presentation space and the client application. WCL does no formatting of any data, including dates. This is handled by the client development tool, such as VB, PB, and VC++. Therefore, Year 2000 issues must be addressed by these development tools, not WCL. In addition, The Company's INFRONT and QuickFRONT products have built in support for Year 2000. Any date functions in use within an INFRONT or QuickFRONT application that use 4 positions for the year will automatically handle Year 2000 with no changes. For date functions that use 2 positions for the year, SETUPSL command can be used to handle the Year 2000. Effect of Inflation Management believes that inflation has not had a material effect on its operations for the periods presented. 12 Cautionary Statement This Form 10-KSB contains certain forward-looking statements regarding, among other things, the anticipated financial and operating results of the Company and it's subsidiaries. For this purpose, forward-looking statements are any statements contained herein that are not statements of historical fact and include, but are not limited to, those preceded by or that include the words, "believes," "expects," "anticipated," or similar expressions. In connection with the safe harbor provisions of the Private Securities Litigation Reform act of 1995, the Company is including this cautionary statement identifying important factors that could cause the Company's or its subsidiaries actual results to differ materially from those projected in forward looking statements made by, or on behalf of, the Company. These factors, many of which are beyond the control of the Company and its subsidiaries, include Multi Soft's ability to, (I) continue as a going concern, (ii) continue to receive royalties from its existing licensing and consulting arrangements, (iii) develop additional marketable software and technology , (iv) compete with larger, better capitalized competitors, and (v) reverse ongoing liquidity and cash flow problems. Item 7. Financial Statements. The following financial statements have been prepared in accordance with the requirements of Item 310(a) of Regulation S-B. MULTI SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED FINANCIAL STATEMENTS FISCAL YEAR ENDED January 31, 1998 INDEX
Page # Report of Independent Certified Public Accountant F1 Consolidated Balance Sheets - January 31, 1998 and 1997 F2, F3 Consolidated Statements of Operations for Each of the Years in the Period Ended January 31, 1998 F4 Consolidated Statements of Changes in Stockholders' Deficiency for Each of the Two Years in the Period Ended January 31, 1998 F5 Consolidated Statements of Cash Flows for Each of the Two Years in the Period Ended January 31, 1998 F6 Notes to Financial Statements F7 - F14
Schedules All schedules of the Company have been omitted because they are inapplicable or not required, or the information is included elsewhere in the financial statements or notes thereto. Item 8. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures None 13 PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act.
Name Position(s) Held - ---- ---------------- Charles J. Lombardo Chairman of the Board of Directors, Chief Executive Officer, Chief Financial Officer and Treasurer Miriam G. Jarney Executive Vice President, Secretary and Director Larry Spatz Director George Mansur Jr. Director James J. Kaput, PhD. Director
Directors are elected to serve until the next annual meeting of 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. A summary of the business experience for each officer and director of the Company is as follows: CHARLES J. LOMBARDO, age 55, has been the Company's Chairman of the Board of Directors since January 1985 and has been the Company's Chief Executive Officer, Chief Financial Officer and Secretary-Treasurer since December 1988. He has been Multi Soft's Chief Executive Officer, Chief Financial Officer and Treasurer since August 1982. From 1972 to 1993, Mr. Lombardo also served as the President of Petro-Art, Ltd., an inactive publicly owned company and its wholly owned subsidiary JCT Enterprises, Inc. Mr. Lombardo was President of Hopewell Graphic Industries from 1969 through 1971 and from 1967 to 1969 was associated with Keystone Computer Associates as a staff member in the Physics Section of the Systems Analysis Department. From 1965 to 1967, Mr. Lombardo served as a scientist in the Plasma Physics Department of Raytheon Space and Information Systems Division. Mr. Lombardo has a Bachelor of Science degree in Physics from Worcester Polytechnic Institute (1964), a Master of Science degree in Physics from Northeastern University (1966) and has continued studies toward a Ph.D. in Theoretical Physics. Mr. Lombardo is a Member of the American Physical Society, The American Mathematical Society, The Society for Industrial and Applied Mathematics, The American Association of Physics Teachers, and the Philosophy of Science Association. MIRIAM G. JARNEY, age 57, has been a Director of the Company since January 1985, Executive Vice President of the Company since 1986 of the Company since December 1988. She has been Executive Vice President, Secretary and a Director of MSI since January 1982. From 1973 to February 1982, Ms. Jarney was a marketing representative for National CSS, Inc., a computer services company that has since been acquired by Dun & Cst, Inc. From 1972 through 1973, Ms. Jarney was associated with Mathematica, Inc., which originated a Data Base Management System called RAMIS, for which National CSS has exclusive marketing rights. Ms. Jarney has also worked as a computer systems analyst for Western Electric Company and Exxon Corporation. She graduated from the Hebrew University in Jerusalem with a degree in Economics and Statistics and has a Master's degree in Computer Science from Stevens Institute of Technology. In February 1982, Ms. Jarney started her own company, Dedicated 14 Systems, Inc., for the purpose of packaging computer software for the microprocessor market, which company is inactive. LARRY SPATZ, age 54, as been a director of the Company since May 12, 1986, and a director of Multi Solutions since July 14, 1989. He has been Chief Executive Officer and Chairman of the Board of Heartthrob Enterprises, Inc., a restaurant and night club management and development company since September 1985. From 1982 to 1984, Mr. Spatz was President of Universal Petroleum, Inc. From 1979 to 1982, he was Vice President and a director of Mercantile Trading Company. Mr. Spatz is also a director of Centrex Communications Systems, Inc. and Ultramed, Inc. GEORGE MANSUR, JR., age 68, has been a Director of the Company since March 1982. Since March, 1984, Mr. Mansur has also been Chairman of ALG Corp. and Chairman of Auto Loan Guarantee Company, as well as President of National Benefit Services Corp. and Executive Vice President of Benefit Services Group, Ltd. Since January 1981, Mr. Mansur has been an officer of Petro-Art Ltd., an inactive publicly owned New Jersey corporation. From 1971 to 1976, he was President of Benefit Communications, Corp. From 1977 to 1978, he was marketing director of Commercial Credit Corp., and in 1979 and 1980, he was an officer of Coronet Graphics, Ltd. and Agri Parogram, Ltd. Mr. Mansur is a Charter Member of the International Association of Financial Planners. DR. JAMES J. KAPUT, age 57, a Director of the Company since July 14, 1989, has been a Professor of Mathematics at Southern Massachusetts University since 1968. Since 1986, he has also been a Research Associate at Harvard University. Dr. Kaput received a B.S. Degree in Mathematics from Worcester Polytechnice Institute in 1964 and a Ph.D in Mathematics from Clark University in 1968. Section 16(a) Beneficial Ownership Reporting Compliance To the Company's knowledge, based solely on a review of such materials as are required by the Securities and Exchange Commission, no officer, director or beneficial holder of more than ten percent of the Company's issued and outstanding shares of Common Stock failed to timely file with the Securities and Exchange Commission any form or report required to be so filed pursuant to Section 16(a) of the Securities Exchange Act of 1934 during the fiscal year ended January 31, 1998. 15 Item 10. Executive Compensation. The following table shows all the cash compensation paid or to be paid by the Company and Multi Soft, as well as certain other compensation paid or accrued, during the fiscal years indicated, to the Chief Executive Officer and Executive Vice President (collectively, "Principal Officers") for such period in all capacities in which they served. No other Executive Officer received total annual salary and bonus in excess of $100,000.
SUMMARY COMPENSATION TABLE ============================================================================================================================ Annual Compensation Long Term Compensation - ------------------------------------------------------------------- -------------------------------------------------------- Awards Payouts =================================================================== ======================================================== Name & Fiscal Salary ($) Bonus ($) Other Annual Restricted Options SARs LTIP All Other Principle Year Compensation Stock Award Payouts ($) Compensation Position ($) ($) ($) - --------------- --------- -------------- ---------- --------------- -------------- ------------- ------------ -------------- Charles J. 1998 (A)$ 60,000 $0 (C)$40,493 $0 $0 $0 $0 Lombardo CEO 1997 $ 80,000 $0 $20,000 $0 $0 $0 $0 1996 $129,505 $0 $36,750 $0 $0 $0 $0 1994 $128,470 $0 $0 $0 $0 $0 $0 1993 $145,354 $0 $43,937 $0 $0 $0 $0 - --------------- --------- -------------- ---------- --------------- -------------- ------------- ------------ -------------- - --------------- --------- -------------- ---------- --------------- -------------- ------------- ------------ -------------- Miriam Jarney 1998 (B)$ 60,000 $0 $0 $0 $0 $0 $0 Exec. V.P. 1997 $ 80,000 $0 $0 $0 $0 $0 $0 1996 $98,491 $0 $0 $0 $0 $0 $0 1994 $98,559 $0 $0 $0 $0 $0 $0 1993 $107,247 $0 $4,991 $0 $0 $0 $0 ============== ========== ============== ========== =============== ============== ============= ============ ============== (A) Accrued and unpaid to Charles Lombardo $39,167 for 1998 and $60,548 for prior year. (B) Accrued and unpaid to Miriam Jarney $10,000 for 1998 and $43,342 for prior year. (C) Consulting Fees
The following table sets forth information with respect to the Principal Officers concerning the grants of options and Stock Appreciation Rights ("SAR") during the past fiscal year:
OPTION/SAR GRANTS IN LAST FISCAL YEAR Individual Grants =============================== ==================== ================================== ================= =============== Name Options/SARs Percent of Total Options/SARs Exercise or Expiration Granted Granted to Employees in Fiscal Base Price Date Year ($/Sh) =============================== ==================== ================================== ================= =============== Charles J. Lombardo -0- - - - - ------------------------------- -------------------- ---------------------------------- ----------------- --------------- Miriam Jarney -0- - - - =============================== ==================== ================================== ================= ===============
16 The following table sets forth information with respect to the Principal Officers concerning exercise of options during the last fiscal year and unexercised options and SARs held as of the end of the fiscal year:
Aggregated Option/SAR Exercises and Fiscal Year-End Option/SAR Values =============================== ================ ========================= ======================== ===================== Number of Securities Value of Underlying Unexercised Shares Unexercised In-The-Money Acquired on Options/SARs at Options/SARs at Name Exercise (#) Value Realized ($) FY-End (#) FY-End ($) =============================== ================ ========================= ======================== ===================== Charles J. Lombardo -0- -0- -0- -0- - ------------------------------- ---------------- ------------------------- ------------------------ --------------------- Miriam Jarney -0- -0- -0- -0- =============================== ================ ========================= ======================== =====================
Directors' Compensation Directors are not compensated for acting in their capacity as Directors. Directors are reimbursed for their accountable expenses incurred in attending meetings and conducting their duties. Employment Agreements On July 14, 1989, Multi Soft entered into a five-year employment agreement with its Chairman of the Board and Chief Executive Officer, Charles J. Lombardo, which may be renewed for successive periods unless terminated by Multi Soft on twelve months notice or by Mr. Lombardo on six months notice. Mr. Lombardo is the Chairman of the Board, Chief Executive Officer, Chief Financial Officer and Treasurer of the Company. The agreement contains non-disclosure provisions and a one year restrictive covenant preventing Mr. Lombardo from becoming employed by a similar company in any state or country in which Multi Soft does business, or engaging in a competitive business for his own account. Mr. Lombardo is entitled to annual salary increases of at least 10%, plus additional annual compensation equal to 2% of Multi Soft's after tax profits. The employment agreement has been renewed for an additional year on an annual basis. Mr. Lombardo also is entitled to a salary from the Company of $25,000 per year, which he agreed to forego for fiscal 1997 and 1998. Through the end of the company's fiscal year ended January 31, 1994, the company owed Mr. Lombardo $98,946 in accrued salary. In July 1994 the company authorized the issuance of 549,700 shares of common stock to Mr. Lombardo in lieu of foregoing accrued salary. On August 1, 1989, Multi Soft entered into a five-year employment agreement with Miriam Jarney, Executive Vice-President and a Director of both Multi Soft and the Company, which may be renewed for additional periods, unless terminated by Multi Soft on twelve months notice or Ms. Jarney on six months notice. Ms. Jarney is entitled to annual salary increases of at least 10%, plus additional annual compensation equal to 1.5% of Multi Soft 's after tax profits. The agreement also contains non-disclosure provisions and a one year restrictive covenant preventing Ms. Jarney from becoming employed by a similar company in any state or country in which Multi Soft does business, or engaging in any competitive business for her own account. The employment agreement has been renewed for an additional year on an annual basis. In January of 1996, the Company issued 1,000,000 shares of common stock to Mrs. Jarney for accrued salary of Multi Soft. 17 During fiscal 1997 and fiscal 1998, Mr. Lombardo and Ms. Jarney accrued a portion of their salaries. The balance due between both officers as of January 31, 1998 is $784,660 including deferred increases of $631,605. Item 11. Security Ownership of Certain Beneficial Owners and Management. Security Ownership of Management -- The number and percentage of Shares of Common Stock of the Company owned of record and beneficially by each owner of 5% or more of the common stock, officer and director of the Company and by all officers and directors of the Company as a group are set forth on the chart below.
================================================================ ============================= ============================= Name and Address of Beneficial Owner Amount and Nature of Percent of Class (1) Beneficial Ownership ================================================================ ============================= ============================= Charles J. Lombardo 4,212,414(2) 23.06% Chairman of the Board, Chief Executive Officer, Chief Financial Officer, & Treasurer 1511 Laurie Lane, Yardley, PA 19067 - ---------------------------------------------------------------- ----------------------------- ----------------------------- Miriam G. Jarney 2,094,100(3) 11.46% Executive Vice President, Secretary, Director 21 Doering Way, Cranford, NJ 07106 - ---------------------------------------------------------------- ----------------------------- ----------------------------- Larry Spatz 0 (4) 0.0% Director 3175 Commercial Ave., Suite 222 Northbrook, IL 60062 - ---------------------------------------------------------------- ----------------------------- ----------------------------- James J. Kaput, PhD. 10,000 ** Director 473 Chase Road, N. Dartmouth, MA 02747 - ---------------------------------------------------------------- ----------------------------- ----------------------------- George E. Mansur, Jr. 7,143 ** Director 1413 State Rd., Phoenixville, PA 19460 - ---------------------------------------------------------------- ----------------------------- ----------------------------- All Executive Officers and Directors as a group 6,323,657(4) 34.61% (5 persons) ================================================================ ============================= =============================
** Less than one percent. (1) Based upon 18,266,898 shares of common stock outstanding on April 29, 1998. (2) Includes shares held by Mr. Lombardo's wife and shares owned jointly with his wife. Also includes 1,000,000 shares issued to Mr. Lombardo in 1996 (See "Item 10. Executive Compensation"). (3) Includes 19,100 shares owned by Ms. Jarney's husband. (4) Excludes shares owned beneficially by a family trust of which Mr. Spatz' wife is one of the beneficiaries. Mr. Spatz has confirmed to the Company that neither he nor his wife has any voting or dispositive power with regard to the shares owned by the trust. 18 Item 12. Certain Relationships and Related Transactions. Multi Soft has a demand loan with a commercial bank. Borrowings are collateralized Multi Soft`s accounts receivable and bear interest at the bank's prime rate plus 2% (10.50% at January 31, 1998). The Company was in default on this loan. Multi Soft obtained a forbearance from the bank in November 1993 requiring an initial $20,000 payment and monthly payments of $1,500 of principal and interest and the personal guarantee of the Company's Chairman. As of February 11, 1998 Multi Soft obtained a new loan in order to pay the existing loan. As a result, the loan is no longer in default. As of this date, Multi Soft is in compliance with the terms of the new loan and owes approximately $16,338. During 1998 and 1997, the maximum amount of borrowings outstanding were $25,500 and $41,000, respectively. Although there is no written agreement between Multi Solutions, and Multi Soft granting Multi Solutions preemptive rights with regard to Multi Solutions majority ownership of Multi Soft common stock, in practice, MSI has and plans to continue to acquire sufficient shares of Multi Soft's common stock to assure its majority ownership in Multi Soft. In January 1996, Multi Soft issued 1,500,000 shares of its common stock to the Company. The transaction was valued at $.22 per share ($330,000) for which Multi Solutions issued a note. In connection with this transaction, Multi Soft paid for the acquisition of 1,000,000 each of the Company's common shares (valued at $0.08 per share) to the chairman and vice president by allowing the indebtedness of the Company to Multi Soft to be reduced by $160,000 which thereby reduced the debt of Multi Soft to the two officers by the same amount. After completion of this series of transactions, the net debt due to Multi Soft in connection with the common stock sale was reduced to $170,000. During fiscal 1996, the company issued 1,000,000 shares to each Charles Lombardo and Miriam Jarney, to pay accrued salary of Multi Soft and reducing debts of the company to Multi Soft. The balance due for accrued salaries between both officers as of January 31, 1998 is $784,660 including deferred increases of $631,605. Multi Soft subleases its office space from C&S Consulting, Inc., a company owned by the Company's Chairman and his wife (see "Item 2. Properties"). 19 PART IV Item 13. Exhibits and Reports on Form 8-K. Exhibits - -------- 3.a Certificate of Incorporation of the Company(1) 3.b By-Laws of the Company(1) 4.a Specimen Common Stock of the Company (1) 4.b Class A Warrant(1) 4.c Class B Warrant(1) 4.d Class C Warrant(4) 10.a Company Employment Agreement with Charles J. Lombardo(5)* 10.b Multi Soft Employment Agreement with Charles J. Lombardo(5)* 10.c Multi Soft Employment Agreement with Miriam G. Jarney(5)* 10.d Licensing Agreement with Widow, Inc.(6) 10.e Agreements with IBM(2) 10.f Copy of MSI's Non-Qualified Stock Option Plan, Stock Grant Program and Employee Incentive Stock Option Plan(3) 10.g Amendments to MSI's Non-Qualified Stock Option and Stock Grant Program(4) 21. List of Subsidiaries 27. Financial data schedule (electronic format only) - ---------- * Management contracts or compensatory plan or arrangement required to be filed as an exhibit. (1) Previously filed as an Exhibit to the Company's Form S-18 Registration Statement, File No. 2-85710-NY filed with the Commission on July 14, 1983, and incorporated herein by reference. (2) Previously filed as an Exhibit to the Company's Form 10-K for the fiscal year ended January 31, 1993 as filed with the Commission on or about Nov. 18, 1993, and incorporated herein by reference. (3) Previously filed as part of the Company's proxy materials for the Annual Meeting of Stockholders held on July 9, 1985, as filed with the Commission on or about May 24, 1985, and incorporated herein by reference. (4) Previously filed as an Exhibit to the Company's Registration Statement on Form S-1, SEC File No. 33-3133, filed with the Commission on February 4, 1986, and incorporated herein by reference. (5) Previously filed as an Exhibit to Multi Soft's Form 10-K for the fiscal year ended January 31, 1990 as filed with the Commission on or about April 29, 1990 under SEC File No. 33-3133-NY, and incorporated herein by reference. 20 (6) Previously filed as an Exhibit to the Company's Form 10-K for the fiscal year ended January 31, 1990 as filed with the Commission on or about April 29, 1990, under SEC File No. 33-3133-NY, and incorporated herein by reference. Reports of Form 8-K No reports on Form 8-K were filed during the last quarter of the fiscal year ended January 31, 1998. 21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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. MULTI SOLUTIONS, INC. Dated: April 29, 1998 By: ---------------------- Charles J. Lombardo, Chief Executive Officer, Chief Financial Officer and Secretary-Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. SIGNATURES TITLE DATE - ---------------------- April 29, 1998 Charles J. Lombardo Chairman of the Board of Directors, Chief Executive Officer, Financial Officer, and Secretary-Treasurer - ---------------------- April 29, 1998 Miriam Jarney Executive Vice President, and Di- rector - ---------------------- April 29, 1998 Larry Spatz Director - ---------------------- April 29, 1998 James Kaput, PhD. Director - ---------------------- April 29, 1998 George E. Mansur, Jr. Director 22 EXHIBIT 21 LIST OF SUBSIDIARIES Multi Soft, Inc. incorporated in the State of New Jersey in January 1985 doing business only under the name of Multi Soft, Inc. NetCast, Inc. incorporated in the State of New Jersey in May 1996 doing business only under the name of NetCast, Inc. 23 Albinder Altman & Block, LLP Certified Public Accountants 462 Seventh Avenue, Suite 1600 New York, NY 10018 Tel: (212) 279-8430 Fax: (212) 279-8459 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Board of Directors Multi Solutions, Inc. We have audited the accompanying balance sheets of Multi Solutions, Inc. and Subsidiaries as of January 31, 1998 and 1997 and the related statements of operations, changes in stockholders' equity and cash flows for the years then ended. 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 audit. We conducted our audit 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 that 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 Multi Solutions, Inc. and Subsidiaries as of January 31, 1998 and 1997 and the results of its operations and its cash flows for the years then ended, in conformity with generally accepted accounting principles. The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note A to the financial statements, the Company has suffered recurring losses from operations and has a working capital deficiency, raising substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note A. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. Albinder Altman & Block, LLP New York, New York April 22, 1998 F-1 MULTI SOLUTIONS,INC AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS January 31 ,1998 and 1997 1998 1997 ----------- ------------ ASSETS CURRENT ASSETS Cash $ 29,524 $ 13,575 Accounts Receivable (net of allowance of $29,086 and $32,880 respectively) 58,635 18,571 Prepaid expenses and other current assets 20,799 13,532 ----------- ----------- 108,958 45,678 FURNITURE AND EQUIPMENT Research and Development Equipment and Software 63,526 14,603 Office furniture and other equipment 20,474 22,476 ----------- ----------- 84,000 37,079 Less: Accumulated Depreciation (10,952) (9,119) ----------- ----------- 73,048 27,960 Organizational costs 2,415 2,415 Less accumulated amortization (484) ----------- ----------- 1,931 OTHER ASSETS Capitalized software development costs 1,716,121 1,852,822 Less accumulated amortization (939,942) (1,110,741) ----------- ----------- 776,179 742,081 Intangibles 200 200 ----------- ----------- $ 960,316 $ 818,334 =========== =========== SEE NOTES TO FINANCIAL STATEMENTS F-2 MULTI SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS January 31, 1998 and 1997 LIABILITIES AND STOCKHOLDERS' 1998 1997 ----------- ------------ DEFICIENCY CURRENT LIABILITIES Loan payable to bank $ 16,338 $ 25,497 Note Payable 11,339 15,504 Accrued payroll 20,080 -- Payroll and other taxes payable 32,755 38,070 Accounts Payable 167,269 164,902 Accrued officer compensation 153,057 103,349 Deferred Revenues 191,820 168,411 ----------- ----------- 592,658 515,733 Deferred compensation due officer /shareholders 631,605 631,605 STOCKHOLDERS' DEFICIENCY Common stock, authorized 40,000,000 shares $.001 par value, issued and outstanding 18,267 18,017 18,266,898 (1998) and 18,016,898 (1997) Additional paid-in capital, 8,643,517 8,592,434 Minority Interest 87,821 87,092 Accumulated deficit (9,013,552) (9,026,547) ----------- ----------- (263,947) (329,004) $ 960,316 $ 818,334 =========== =========== SEE NOTES TO FINANCIAL STATEMENTS F-3 MULTI SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS Years Ended January 31, 1998 and 1997 1998 1997 ------------- ------------- REVENUES License fees $ 243,146 $ 356,494 Maintenance fees 645,265 688,692 Consulting and Other fees 13,039 19,949 ------------ ------------ Total revenues 901,450 1,065,135 EXPENSES Software development and technical support 258,584 344,588 Selling and administrative 637,165 817,882 ------------ ------------ Total expenses 895,749 1,162,470 ------------ ------------ (Loss) from operations 5,701 (97,335) OTHER INCOME (EXPENSE) Other Revenues - 109,102 Interest Expense (804) (7,858) ------------ ------------ Total other income (804) 101,244 Net Income $ 4,897 $ 3,909 ============ ============ Weighted average shares outstanding 18,121,062 17,986,898 ============ ============ Income per share a a ============ ============ (a) less then $.01 per share SEE NOTES TO FINANCIAL F-4 STATEMENTS MULTI SOLUTIONS,INC AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFECIENCY
Years ended January 31, 1998 and 1997 Total Total Common Stock paid in Accumulated Minority Deferred stockholders Shares Amount capital deficit Interest Compensation deficiency Balance at January 31, 1996 17,806,898 17,807 8,578,537 (9,092,304) (495,960) Issuance of restricted common stock 210,000 210 16,564 (4,000) 12,774 Addition to Minority Interest used to 61,848 61,848 reduce loss absorbed at %100 Addition of Minority Interest 87,092 87,092 Deferred Compensation 1,333 1,333 Net Income 3,909 3,909 ----------- ----------- ----------- ----------- ----------- ----------- ----------- Balance at January 31, 1997 18,016,898 18,017 8,595,101 (9,026,547) 87,092 (2,667) (329,004) Issuance of restricted common stock 250,000 250 49,750 50,000 Addition to Minority Interest used to reduce loss absorbed at %100 8,098 8,098 Addition of Minority Interest 729 729 Deferred Compensation 1,333 1,333 Net Income 4,897 4,897 ----------- ----------- ----------- ----------- ----------- ----------- ----------- 18,266,898 $ 18,267 $ 8,644,851 $(9,013,552) $ 87,821 $ (1,334) $ (263,947) =========== =========== =========== =========== =========== =========== ===========
SEE NOTES TO FINANCIAL F-5 STATEMENTS MULTI -SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS Years ended January 31, 1998 and 1997
1998 1997 ---------- ---------- Cash flows from operating activities Net Income (Loss) $ 4,897 $ 3,909 Adjustments to reconcile net income (loss) to net cash provided by operating activities Prior period adjustment Depreciation and amortization 290,999 347,548 Common stock issued to Solutions Changes in assets and liabilities Accounts receivable (40,064) 81,857 Prepaid expenses and other current assets (7,267) - Accrued payroll 20,080 (30,285) Payroll and other taxes payable (5,315) (36,923) Note Payable (4,165) 15,504 Accounts payable and accrued expenses 2,369 (51,652) Accrued officer compensation 49,706 (6,667) Deferred officer compensation - (5,000) Deferred revenues 23,409 (141,381) Long term deferred revenues (8,022) --------- --------- Net cash provided by operating activities 334,649 168,888 Cash flows from investing activities Capital expenditures (50,915) (29,641) Capitalized software development costs (318,786) (362,692) --------- --------- Net cash used in investing activities (369,701) (392,333) Cash flows from financing activities Net repayments under loan and line of credit ageements (9,159) (15,602) Loan from officer Increase in Minority Interest 8,826 148,940 Restricted Common stock issued to Solutions Issuance of capital stock 51,333 14,107 --------- --------- Net cash provided by financing activities 51,000 147,445 --------- --------- NET INCREASE (DECREASE) IN CASH 15,948 (76,000) Cash at beginning of year 13,575 89,575 --------- --------- Cash at end of year $ 29,523 $ 13,575 ========= =========
SEE NOTES TO FINANCIAL STATEMENTS F-6 Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 1998 and 1997 NOTE A - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION Multi Solutions, Inc. (the Company) was incorporated under the laws of the State of New Jersey on July 26, 1982. The Company is presently a holding company for its ownership of its subsidiaries, Multi Soft, Inc. ("Multi Soft") and NetCast, Inc. ("NetCast"). As of January 31, 1998, the Company owns 55.4% of "Multi Soft" and 75% of NetCast. The Company's consolidated financial statements have been presented on a going concern basis which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The liquidity of the Company has been adversely affected in recent years by significant losses from operations. The Company had net income of of $4,897 in 1998 and $3,909 in 1997. In addition, at January 31, 1998, the Company's current liabilities exceeded current assets by $483,700 and total liabilities exceeded total assets by $263,947. The Company intends to aggressively market its new products (see note I), control operating costs and broaden its product base through enhancements of products for use by non-technical computer personnel. The Company believes that these measures will provide sufficient liquidity for it to continue as a going concern in its present form. Accordingly, the consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amount and classification of liabilities or any other adjustments that might be necessary should the Company be unable to continue as a going concern in its present form. NetCast acquired the assets of the Discovery Publishing Group in September 1996 for 200,000 shares of its restricted common stock valued at par. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 1. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, Multi Soft, Inc. ("Multi Soft") and NetCast, Inc. ("NetCast"). All significant intercompany balances and transactions have been eliminated in consolidation. None of Multi Soft's net income was allocated to minority shareholders because the company absorbed the minority interest of accumulated losses allocated up to January 31, 1995. 2. Furniture and Equipment Furniture and equipment are stated at cost. Depreciation is provided on the straight-line method over the estimated useful lives of the assets which range from three to seven years. Depreciation expense was $6,308 and $5,060 for the years ended January 31, 1998 and 1997 respectively. F-7 Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 1998 and 1997 3. Capitalization of Computer Software Capitalized software development costs relating to products for which technological feasibility has been established qualify for capitalization under Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased, or Otherwise Marketed." Research and development costs associated with the creation of computer software prior to reaching technological feasibility are expensed as incurred, except for related computer equipment expenditures such as personal computers and other hardware components, which are capitalized and depreciated over their useful lives if the equipment is deemed to have alternative future use. Capitalized software development costs are amortized to operations when the product is available for general release to customers. Amortization is calculated using (a) the ratio of current gross revenues for the product to the total of current and anticipated gross revenues for that product or (b) the straight-line method over the remaining useful life of the product, whichever is greater. Multi Soft is amortizing, over a sixty month period, the capitalized software costs for its Windows-based products. The period is based on sales forecasts for the seven year agreement between Multi Soft, Inc. and IBM which began in October 1993. Multi Soft's Windows products are compatible with Windows 95 and further modifications are continually made, specifically for 32 bit environments (Windows 95 and Windows NT). Unamortized costs relating to Windows products at January 31, 1998 and 1997 are $776,179 and $739,641, respectively. As of January 31, 1998, there no longer are any unamortized capital salaries for any DOS products. The unamortized costs relating to DOS products at January 31, 1997 were $2,440. Amortization expense for all products at January 31, 1998 and 1997 was $258,584 and $344,588 respectively. 4. Revenue Recognition In accordance with Statement of Position 91-1, "Software Revenue Recognition" (SOP 91-1), the Company's policy is to recognize license and maintenance fees when earned and consulting fee income when services are rendered. License fees are recognized upon shipment of the software while maintenance fees are recorded over the period covered by the related contract. Consulting is performed on a time and material basis. 5. Deferred Compensation Deferred compensation arising from the issuance of stock grants is amortized over the term of the related grant or employment agreements (one to five years). The amount of compensation attributable to stock grants is determined by the market price of the Company's stock on the date of the grant. F-8 Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 1998 and 1997 6. Income (Loss) Per Share Income (loss) per share is computed using the weighted average number of common shares outstanding during the period. Common stock equivalents are antidilutive and, therefore, are not considered in the computation of loss per share. 7. 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 reported amounts of revenues and expenses during the reporting period. Actual results could differ from thoses estimates. 8. Income Taxes The Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which significantly changes the accounting for deferred income taxes. The standard provides for a liability approach under which deferred income taxes are provided for based upon enacted tax laws and rates applicable to the periods in which the taxes become payable. The Company adopted the new standard for its year ended January 31, 1994. The cumulative effect of the change in accounting principles was not significant. NOTE C - NOTES PAYABLE 1. Demand Loan - Bank Multi Soft has a demand loan payable to a commercial bank ($16,338 and $25,497 at January 31, 1998 and 1997 respectively). Borrowings are collateralized by Multi Soft's accounts receivable and bear interest at the bank's prime rate plus 2% (10.5% and 10.5% at January 31, 1998 and 1997 respectively). Multi Soft obtained a forbearance from the bank in November 1993 requiring a $20,000 payment upon execution, monthly payments of $1,500 principal and interest and the personal guarantee of the Company's chairman. As of February 11, 1998, Multi Soft paid the outstanding loan balance by obtaining a new loan. As a result, the loan is no longer in default. As of January 31, 1997, the Company is in compliance with the terms of the agreement. During 1998 and 1997, the maximum amount of borrowings outstanding was $25,497 and $41,099, respectively, the average borrowing were $20,918 and $33,248, respectively, and the weighted average interest rates were 10.5%. 2. Note Payable In June 1996, $18,700 due to a vendor was converted to a note at the rate of $597 per month for 36 months with interest at 9%. F-9 Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 1998 and 1997 NOTE D - INCOME TAXES As a result of losses incurred in recent years, the Company and its subsidiaries separately have net operating loss carryforwards available to offset future federal taxable income of approximately $5.5 million. These losses expire at various dates through 2012. The Company adopted, effective February 1, 1993, SFAS No. 109, "Accounting for Income Taxes." Under the liability method specified by SFAS No. 109, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities as measured by the enacted tax rates which will be in effect when these differences reverse. Deferred tax expense is the result of changes in deferred tax assets and liabilities. The principal types of differences between assets and liabilities for financial statement and tax return purposes are capitalized software development costs, deferred compensation, deferred revenues and allowance for uncollectible accounts. The deferred method, used in years prior to 1993, required the Company to provide for deferred tax expense based on certain items of income and expense which were reported in different years in the financial statements and the tax returns as measured by the tax rate in effect for the year the difference occurred. Deferred tax (liabilities) assets consist of the following at January 31, 1998 and 1997: 1998 1997 ---- ---- Capitalized software ($ 248,000) $ (242,000) Allowance for bad debts 11,000 3,000 Deferred compensation 234,000 234,000 Deferred revenue royalties 77,000 92,000 Loss carryforwards 4,088,000 4,088,000 ----------- ----------- Gross deferred tax assets 4,162,000 4,175,000 Deferred tax assets valuation allowance (4,162,000) (4,175,000) $ -0- $ -0- =========== ============ NOTE E - STOCKHOLDERS' DEFICIENCY 1. Warrants The expiration dates of the Company's Class A, Class B and Class C Warrants have been extended to June 1, 1998. There are presently outstanding a total of 723,793 Class A Warrants, 600 Class B Warrants and 714,012 Class C Warrants. F-10 Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 1998 and 1997 2. Stock Option Plan In June 1993, the Company adopted an Employee, Consultant and Advisory Stock and Option Compensation Plan (the Plan). Pursuant to the terms of the Plan, an aggregate of up to 2,500,000 shares of common stock, $0.01 par value per share (the common stock), and/or options to purchase common stock may be granted to persons who are, at the time of issuance or grant, employees or officers of, or consultants or advisors to, the Company. To date, an aggregate of 145,880 shares has been issued pursuant to the Plan. 3. Common Stock Issued to Officers In January 1996, Multi Soft issued 1,500,000 shares of its common stock to the Company. The transaction was valued at $.22 per share ($330,000) for which Multi Solutions was to issue a note. In connection with this transaction, Multi Soft paid for the acquisition of 1,000,000 each of the Company's common shares (valued at $0.08 per share) to the chairman and vice president by allowing the indebtedness of the Company to Multi Soft to be reduced by $160,000 which thereby reduced the debt of Multi Soft to the two officers by the same amount. After completion of this series of transactions, the net debt due to Multi Soft in connection with the common stock sale was reduced to $170,000. NOTE F - COMMITMENTS AND CONTINGENCIES 1. Leases Multi Soft is a subtenant in office space leased by an entity substantially owned by the Company's chairman and his wife. At present Multi Soft has a quarter-by-quarter term lease with a base rent of $4,950 per month. Rental expense under the lease aggregated approximately $59,450 and $57,200 for the years ended January 31, 1998 and 1997, respectively. In June 1995 the Company entered into a three year noncancellable operating lease for a color laser copier with monthly payments of $606 plus tax and per copy charges through May 1998. Future minimum lease payments under the noncancellable equipment operating lease are as follows: Year Ending January 31, 1999 $3,000 F-11 Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 1998 and 1997 In November, 1997 the company entered into a operating lease for a laser copier with monthly payments of $365 including tax and copy charges through 2002. Year Ending January 31, ----------- 1999 $4,380 2000 4,380 2001 4,380 2002 4,380 ----- $17,520 ======= 2. Employment Agreements Multi Soft has employment agreements with two officers which provide minimum annual compensation of $200,000 through July 1998. Upon execution of these agreements, an aggregate of 91,667 shares of Multi Soft's common stock was issued to the employees. In addition, the employment agreements entitle the two employees to 2% and 1.5%, respectively, of each fiscal year's after tax profits of Multi Soft. 3. Payroll Taxes Certain Federal and state taxes, interest, and penalties aggregating approximately $33,000 remain unpaid at January 31, 1998. In March 1998 $21,000 was paid toward the liability in connection with a settlement agreement leaving $12,000 unpaid. 4. Litigation The Company and Multi Soft have been, from time to time, parties to legal actions arising in the normal course of their business. In the opinion of management, the disposition of these actions will not have a material effect on the financial position or results of operations of the Company taken as a whole. In May 1997, a lawsuit was commenced against NetCast by former consultants for approximately $113,000. The Company has accrued $24,000 prior to commencement of the action. The Company intends to vigorously defend the lawsuit and has made counterclaims. NOTE G - MAJOR CUSTOMERS In fiscal 1998 one customer accounted for 29%. In fiscal 1997, one customer accounted for 29% of total revenue. NOTE H - SUPPLEMENTAL INFORMATION Supplemental disclosures of cash flow information for years ended January 31, 1998 and 1997 are as follows: F-12 Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 1998 and 1997 1998 1997 ---- ---- Cash paid during the year for Interest $3,304 $7,858 ===== ===== NOTE I - SOFTWARE LICENSING AGREEMENT 1. Software Licensing Agreement On October 8, 1993, Multi Soft entered into a Software Licensing Agreement (SLA) and other ancillary agreements with IBM Corporation (IBM) providing for certain exclusive marketing rights for Multi Soft's principal product: Windows Communications Library (WCL) with IBM IMS Extensions. This is a software product specifically modified for use with IBM mainframe systems. The agreements, effective for a term of seven years with automatic renewals for two additional one year periods, provide for the payment of percentage royalties and unit royalties as specified in the agreement. IBM may terminate the agreement after the first year upon 90 days notice. The agreement further provides for minimum non-refundable royalty advances to Multi Soft aggregating $300,000 through June 1996. The agreements create certain obligations by Multi Soft, including future maintenance, staffing, response and software source code custody. Future enhancements may be provided by Multi Soft for additional fees. As of July 1995 Multi Soft has been receiving monthly maintenance from IBM regarding the above license agreement. The $300,000 royalty advance has been recorded as deferred revenue in fiscal year 1994 and is being recognized as income over the longer of: o The 21 month period of maintenance included in the agreement without additional fees; or o The period in which the royalty is earned through IBM sales throughout the seven year term of the agreement. Effective June 1, 1995 Multi Soft and IBM amended their Software License Agreement number: STL93199 and its related worldwide marketing agreements, such that, $150,000 dollars of the $300,000 advance amount deferred as of January 31, 1994 shall, as of June 1, 1995 no longer be subject to offset against royalties accrued. For the years ended January 31, 1998 and 1997, Muli Soft recognized as income $8,022 and $42,864 of the $300,000 advance respectively. The contract with IBM's Network Software Division provides that Multi Soft will receive prepaid royalties of $600,000 in quarterly installments over a two year period. As a result, IBM receives non exclusive and non transferable license to market certain Multi Soft products. The product is marketed under IBM's logo as `Personal Communications Toolkit for Visual Basic. Multi Soft had been receiving maintenance fees from the above contract. F-13 Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 1998 and 1997 2. Marketing Agreements with IBM The Company entered into marketing agreements with IBM Corporation (IBM) providing for the marketing rights of the Windows Communications Library (WCL) software with IBM IMS Extensions in the United States, Puerto Rico, the Asia Pacific Region, Europe, the Middle East and Africa. The agreements are for three year terms and provide for the payment of percentage royalties as specified in the agreement. 3. Joint Development and Marketing Agreement with Bellcore In 1995 Multi Soft, Inc. entered a joint development and marketing agreement with Bellcore to develop and market a Sun Solaris Unix version of its WCL product. The agreement provides that Bellcore pay Multi Soft for developing an extension of its WCL product to the Sun Solaris Unix environment. Additionally, Bellcore shall pay a specified monthly maintenance fee for a period of one year. Also, it provides for a joint marketing agreement in which both companies will share marketing royalties. During fiscal 1997, Multi Soft had been receiving maintenance fees from the above contract. During fiscal 1998, Multi Soft no longer had been receiving maintenance from this contract. NOTE J - RELATED PARTY TRANSACTIONS Multi Soft, from time to time, pays incidental expenses of the Company and allocates its share of certain expenses. These items are credited to intercompany payable and no payments have been made during the fiscal year. The balance due to Multi Soft at January 31, 1998 and 1997 was $422,239 and $422,951. Multi Soft provides certain services and office space to NetCast. The balance due from NetCast, Inc. at January 31, 1998 was $155,251. The Company has guaranteed this debt to Multi Soft. NOTE K - NEW SUBSIDIARY NetCast, Inc. is a subsidiary company and was incorporated in April of 1996. It is in the business of developing new Internet technologies to create a series of products and businesses that will extend the power of advertising on the Internet. The Company currently owns 75% of NetCast. The Board of Directors consists of two officers, Charles Lombardo and Miriam Jarney. NetCast is in the process of raising private funding for its operations. However, we can make no assurance it will obtain the funding necessary to bring its software to the marketplace. F-14 EX-27 2 FDS
5 12-MOS JAN-31-1998 JAN-31-1998 29,524 0 58,635 29,086 0 108,958 73,048 (10,952) 960,316 592,658 0 18,267 0 0 263,947 960,316 243,146 901,450 0 0 804 0 804 4,897 0 4,897 0 0 0 4,897 0 0
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