10KSB 1 v056006_10ksb.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-KSB |X| ANNUAL REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended January 31, 2004 OR |_| TRANSITION REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 0-12162 MULTI SOLUTIONS, INC. (Name of Small business issuer in its charter) New Jersey 22-2418056 (State or other jurisdiction of (I.R.S. Employer Identification incorporation or organization) No.) 65 East 55th Street, 2nd Floor, New York, NY 10022 (Address of principal executive offices) (Zip Code) Issuer's telephone number (212) 451-2254 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 |_| No |X| 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| Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act). |X| The Issuer's consolidated revenues for the fiscal year ended January 31, 2004 was: $136,739. The aggregate market value of the voting stock held by non-affiliates (1) of the registrant based on the average of the closing ask ($0.0) and ($0.0) bid price of such stock, as of October 17, 2006 is $NIL based upon $0.0 multiplied by the 14,701,454 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 January 31, 2004, is 21,096,969 shares, all of one class of $.001 par value Common Stock. DOCUMENTS INCORPORATED BY REFERENCE: None Transitional Small Business Disclosure Format (check one): Yes |_| No |X| FORWARD LOOKING STATEMENTS This Annual Report and any documents incorporated herein by reference, if any, contain forward-looking statements. These forward-looking statements refer to our business, financial condition and prospects that reflect our management's assumptions and beliefs based on information currently available. We can give no assurance that the expectations indicated by such forward-looking statements will be realized. If any of our assumptions should prove incorrect, or if any of the risks and uncertainties underlying such expectations should materialize, our actual results may differ materially from those indicated by the forward-looking statements. There may be other risks and circumstances that management may be unable to predict. When used in this Report, words such as, "believes," "expects," "intends," "plans," "anticipates," "estimates" and similar expressions are intended to identify and qualify forward-looking statements, although there may be certain forward-looking statements not accompanied by such expressions. PART I Item 1. Description of Business The Company had nominal operations from 2002 to 2005, and completely discontinued operations in 2005. The Company may now be deemed to be a blank check company under Section 419 of the Securities Act of 1933, as amended. The only prospects for the Company and its subsidiaries is an acquisition in a reverse merger transaction. General During our fiscal year ended January 31, 2004, we: o supported our subsidiary, Multi Soft, Inc; and o supported our subsidiary, FreeTrek., Inc., to market a new software-based tool and promotion program for tapping into the marketing communications potential of the internet - FreeTrek is offering major marketers the opportunity to communicate one-to-one with carefully defined private networks of their most valuable customers. The operations of Multi Soft, FreeTrek and NetCast are discussed below. MULTI SOFT, INC. We incorporated Multi Soft in January 1985 as a wholly owned subsidiary. As of the date of this report, we own approximately 51.3% of Multi Soft. Multi Soft produced, marketed and maintained the following products: o COMRAD, which stands for Component Object Model Rapid Application Development, for 32 bit Windows 95, 98, 2000 and NT; 2 o The Windows Communications Library (TM), commonly referred to as WCL, for Windows 3x, 95, 98 and NT; and o INFRONT for DOS. Multi Soft's product line consisted of tools for the development of client-server, front-ending, and Internet based applications using a mainframe or an Internet server. Since the business operations ceased in 2005, no further discussion of the Company's products are contained in this document. Key Services Provided by Multi Soft Multi Soft offered 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. Multi Soft also offered contract technical consulting services. In-House Marketing and Sales Charles Lombardo and Miriam Jarney, two of our officers and directors, were responsible for sales and marketing of Multi Soft's products and services. Distributors and Value Added Resellers (VARs) Multi Soft used international distributors and VARs on a non-exclusive basis to supplement its domestic sales and marketing efforts. FREETREK. INC. We formed FreeTrek.Com, Inc. under the laws of the state of New Jersey in April 1999. At present, we own approximately 45.8% of FreeTrek's issued and outstanding shares of common stock. At January 31, 2002, we owned approximately 53.1%. The balance is held by private investors who provided services and cash to fund the initial software development and other start-up activities. FreeTrek was a business to business to consumer affinity group service company, commonly referred to as a B2B2C affinity group service company, that was marketing its products and services to businesses, referred to as sponsors, that want to create an Internet community of their current and future customers. We refer to this as a virtual private community or VPC. We discontinued operations of FreeTrek in 2003. 3 NETCAST, INC. Our 75% subsidiary, NetCast, Inc., was created in 1996 to develop new Internet technologies to create a series of products and businesses that would extend the power of advertising on the Internet. Multi Soft provided services and office space to NetCast at cost for which it has billed approximately $240,000 through January 31, 2000, of which $78,000 was incurred during the fiscal year ended January 31, 1999. Multi Soft charged NetCast for this time. We have guaranteed NetCast's debt to Multi Soft. In January 2000, we decided to discontinue any further operations of NetCast. As a result, a loss of ($87,462) was reflected in our consolidated financial statements for the fiscal year ended January 31, 2000 as a loss from discontinued operations. During the year ended January 31, 2002, Multi Soft recorded a valuation allowance of $200,000 against this debt. Employees We are essentially a holding company. Accordingly, we had only two employees, our executive officers: Charles J. Lombardo and Miriam Jarney. Multi Soft's employees devote such time as is necessary to our business. Currently, we have no employees. Multi Soft had one full time employee during the year ended January 31, 2004. Multi Soft previously had four technical and engineering personnel, who have been laid off due to our weak financial condition. We also had several independent consultants, who worked for us on an as needed basis. During the year ended January 31, 2003, FreeTrek had two employees, our executive officers: Charles J. Lombardo and Miriam Jarney. Multi Soft's employees devoted such time as is necessary to FreeTrek's business. Competition Multi Soft operated in a business composed of strong competitors, many of which 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 were available to Multi Soft. These, among other factors, contributed to the Company's discontinuance of operations. FreeTrek competed with other firms and entities that provide marketing and advertising to companies, institutions and associations that want to retain and/or increase their client or membership base. Most of its competitors have substantially greater resources, are better established, and have a longer history of operations than FreeTrek. These, among other factors, contributed to the FreeTrek's discontinuance of operations. RISK FACTORS Our business is subject to numerous risk factors, including the following: Since we discontinued operations in 2005, we have no operating history for evaluating our future business prospects. 4 Since we discontinued operations in 2005, we have no operating history nor any revenues or earnings from operations. We have little or no tangible assets or financial resources, and will, in all likelihood, continue to sustain operating expenses without corresponding revenues, at least until the consummation of a business combination. This will probably result in our incurring net operating losses that will increase continuously until we can consummate a business combination with a profitable business opportunity. There is no assurance that our proposed operations will be successful. The success of our proposed plan of operation will depend to a great extent on the operations, financial condition and management of the identified business opportunity. While we intend to seek business combination(s) with entities having established operating histories, there can be no assurance that we will be successful in locating candidates meeting such criteria. In the event we complete a business combination, of which there can be no assurance, the success of our operations may be dependent upon management of the successor firm or venture partner firm and numerous other factors beyond our control. There is no assurance that we will identify such a business opportunity and consummate such a business combination. Finally, our officers and directors have little direct experience with blank check companies or related transactions. State blue sky registration laws restrict the resale of our stock. Transferability of our common stock is very limited because a significant number of states have enacted regulations pursuant to their securities laws, or so-called "blue sky" laws, restricting or prohibiting the initial sale and subsequent resale of securities of "blank check" companies like ours within that state. In addition, many states, while not specifically prohibiting or restricting "blank check" companies, would not register our securities for sale or resale within their states. Because of these regulations, we currently have no plan to register any of our securities with any state. To ensure that any state laws are not violated through the resale of our securities, we will refuse to register the transfer of any of its securities to residents of any state that prohibit such resale, or if no exemption is available for such resale. It is not anticipated that a secondary trading market for our securities will develop in any state until subsequent to consummation of a business combination, if at all. We face competition for business opportunities and combinations, and as a result we may never complete a merger or acquisition. We are, and will continue to be, an insignificant participant in the business of seeking mergers, joint ventures, and acquisitions of small private and public entities. A large number of established and well-financed entities, including venture capital firms, are active in mergers and acquisitions of companies that may be desirable target candidates for us. Nearly all such entities have significantly greater financial resources, technical expertise, and managerial capabilities than we do, and consequently, we are at a competitive disadvantage in identifying possible business opportunities and successfully completing a business combination. Moreover, we also compete in seeking merger or acquisition candidates with numerous other small public companies. Our officers and directors will only devote part time efforts due to their involvement in other business interests, which may further limit our likelihood of success. While seeking a business combination, our officers and directors anticipate devoting up to twenty hours per month to our business. They will be the only people responsible in conducting our daily operations, including searches, evaluations, and negotiations with potential merger or acquisition candidates. We have not entered into any written employment agreement with any officers or directors and do not expect to do so in the foreseeable future. We have not obtained key man life insurance on any officer or director. 5 We may have potential business conflicts of interest with other companies formed by our officers and directors, which may not necessarily be favorable to us. Our officers and directors participate in other business ventures that may compete directly with ours, including three other blank check companies. Additional conflicts of interest and non-arms length transactions may also arise in the future. We have adopted a policy that we will not enter into a business combination with any entity in which any member of management serves as an officer, director or partner, or in which such person or such person's affiliates or associates hold any ownership interest. The terms of a business combination may include that certain of our officers and directors remain in the new combination. Our officers and directors would directly benefit from such employment. Such benefits may influence our officers and directors choice of a target company. Our Articles of Incorporation provide that we indemnify our officers and directors for liabilities, which can include liabilities arising under the securities laws. Therefore, our assets could be used, or attached, to satisfy any liabilities subject to this indemnification. Our lack of market research or marketing organization could adversely affect our ability to successfully find and conclude a merger or acquisition. We have neither conducted, nor have others made available to us, results of market research indicating that market demand exists for the transactions contemplated by us. Moreover, we do not have, and do not plan to establish, a marketing organization. Even in the event demand is identified for a merger or acquisition contemplated by us, there is no assurance we will be successful in completing a business combination. If we are characterized as an investment company, we face significant legal requirements that have the potential to subject us to substantial liability and increase our costs of doing business. Although we will be subject to regulation under the Securities Exchange Act of 1934 (the "Exchange Act"), we believe we will not be subject to regulation under the Investment Company Act of 1940, insofar as we are not engaged in the business of investing or trading in securities. In the event we engage in business combinations that result in our holding passive investment interests in a number of entities, we could be subject to regulation under the Investment Company Act of 1940. In this event, we would be required to register as an investment company and would incur significant registration and compliance costs. We have obtained no formal determination from the Securities and Exchange Commission as to our status under the Investment Company Act of 1940 and, consequently, any violation of the Act would subject us to material adverse consequences. A consummated merger or acquisition will likely result in a change in control, and our current management will no longer have power to influence us. A business combination involving the issuance of our common stock will, in all likelihood, result in shareholders of a private company obtaining a controlling interest in us. Any such business combination may require our management to sell or transfer all or a portion of their common stock, or resign as members of the Board of Directors. The resulting change in our control could result in the removal of our current management and a corresponding reduction in or elimination of their participation in our future affairs. 6 Taxation concerns may influence whether a future identified business opportunity proceeds. Federal and state tax consequences will, in all likelihood, be major considerations in any business combination we undertake. Currently, such transactions may be structured so as to result in tax-free treatment to both companies, pursuant to various federal and state tax provisions. We intend to structure any business combination so as to minimize the federal and state tax consequences to the target entity and us; however, there can be no assurance that a business combination will meet the statutory requirements of a tax-free reorganization, or that the parties will obtain the intended tax-free treatment upon a transfer of stock or assets. A non-qualifying reorganization could result in the imposition of both federal and state taxes, which may have an adverse effect on both parties to the transaction. Requirement of audited financial statements may disqualify business opportunities. Section 13 and 15(d) of the Exchange Act require companies subject thereto to provide certain information about significant acquisitions, including certified financial statements for the target entity acquired, covering one, two or three years, depending on the relative size of the acquisition. The time and additional costs that may be incurred by some target entities to prepare such statements may preclude consummation of an otherwise desirable acquisition by us. Acquisition prospects that do not have or are unable to obtain the required audited financial statements may not be appropriate for acquisition so long as the reporting requirements of the Exchange Act are applicable. We may be subject to deregistration, and if this were to occur, our attractiveness as an acquisition vehicle would be severely impaired. On July 27, 2005, the Company received a letter from the Securities and Exchange Commission, notifying the Company that it was subject to deregistration pursuant to Section 12 of the Exchange Act for failure to comply with SEC reporting requirements. The Company responded and provided the SEC with a timetable for filing all delinquent reports and to comply with the Exchange Act by October 31, 2006. The Company believes it will be able to comply with the Exchange Act by October 31, 2006, but there can be no assurance that we will comply, or that our compliance will be sufficient to forestall deregistration. If we are deregistered, our attractiveness as an acquisition vehicle would be severely impaired. Item 2. Description of Properties In February 2002, Multi Soft entered into an office lease for a two-year term through February 14, 2004. The lease requires monthly payments of $2,000 through January 2003 and $2,125 from February 2003 through January 2004. Multi Soft has deposited $6,000 as security with the landlord. This lease ended and we no longer occupy this space. Presently, we us the address of an investor at 65 East 55th Street, 2nd Floor, New York, NY as a mailing address, but we have no operations there. 7 Item 3. Legal Proceedings We are not presently a party to any material litigation. However, we Multi Soft and NetCast have been, from time to time, parties to legal actions arising in the normal course of our business. In the opinion of management, the disposition of these actions will not have a material effect on our financial position or results of operations taken as a whole. As of October 17, 2006, there is one outstanding judgment against the Company: o New York State Department of Taxation and Finance for $1,275 filed on May 24, 2004. As of October 17, 2006, there are four outstanding judgments against Multi Soft, Inc.: o New York State Department of Taxation and Finance for $13,889 filed on March 26, 2002. o New York State Department of Taxation and Finance for $6,691 filed on April 22, 1994. o State of New Jersey for $5,183.78 filed August 24, 1994. o A commercial service provider for $15,972 filed on March 14, 2003. All of the above mentioned judgments are reflected in the balance sheets under various captions in current liabilities. In May 1997, a lawsuit was commenced against NetCast by former consultants for approximately $113,000. The Company vigorously defended the lawsuit. During the fiscal year ended January 31, 2000 this lawsuit was found in favor of the plaintiff. Although NetCast is liable for the damages from this lawsuit, it has no assets and has discontinued operations. Consequently, no future income will be earned and NetCast will never have any assets. The Company is not liable for the debts of NetCast. The liability for this award has been included in the consolidated financial statements under the caption "Litigation judgment payable - NetCast subsidiary". Item 4. Submission of Matters to a Vote of Security Holders No matters were submitted to a vote of our security holders during the last quarter of our fiscal year ended January 31, 2004. 8 PART II Item 5. Market for Common Equity and Related Stockholder Matters (a) Market Information -- Our Common Stock is traded in the over-the-counter market, and is quoted on The OTC Bulletin Board (symbol: "MULT"). The following tables set forth the range of high and low closing bid prices for the our Common Stock on a quarterly basis for the year before this fiscal year as reported by Pink Sheets LLC (which reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions). Historical information on trading prices since that date is not currently available. The current price of the common shares is $NIL. Bid Prices Period - Fiscal Year 2002 High Low -------------------------------------- ---- ---- First Quarter ending April 30, 2001 .30 .12 Second Quarter ending July 31, 2001 .17 .12 Third Quarter ending October 31, 2001 .20 .085 Fourth Quarter ending January 31, 2002 .11 .055 (b) Holders -- There were approximately 767 holders of record of our common stock, as of May 15, 2002, inclusive of those brokerage firms and/or clearing houses holding our securities for their clientele (with each such brokerage house and/or clearing house being considered as one holder). (c) Dividends -- We have not paid or declared any dividends upon our common stock since inception and, by reason of our present financial status and our contemplated financial requirements, we do not contemplate or anticipate paying any dividends upon our common stock in the foreseeable future. 9 Issuances of Common Stock We did not issue any securities during the last quarter of the year ended January 31, 2004. Item 6. Management's Discussion and Analysis of Financial Condition and Results of Operations Cautionary Statement This quarterly report on form 10-KSB contains certain forward-looking statements regarding, among other things, our anticipated financial and operating results and those of our subsidiaries. For this purpose, forward-looking statements are any statements contained in this report that are not statements of historical fact and include, but are not limited to, those preceded by or that include the words, "believes," "expects," or similar expressions. In connection with the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, we are including this cautionary statement identifying important factors that could cause our or our subsidiaries' actual results to differ materially from those projected in forward looking statements made by, or on behalf of, us. Results of Operations Year ended January 31, 2004 compared to year ended January 31, 2003 We generated revenues during the year ended January 31, 2004, of $136,739 compared to revenues of $147,143 during the year ended January 31, 2003. The revenues during all these periods were generated by our subsidiary, Multi Soft. The decrease in revenues of $10,404 or approximately 7% was due primarily to an increase in Multi Soft's primary sources of revenues - license, and maintenance fees, offset by a decrease in consulting fees. Our operating expenses (excluding the write-down of previously capitalized software costs of $620,633) were $362,865 for the year ended January 31, 2004 compared to $850,146 for the prior fiscal year, a decrease of $487,281 or approximately 57% resulting from cost cutting measures. We had other income of $NIL during the year ended January 31, 2004 compared to $62,157 of other income for the prior fiscal year. The other income for the year ended January 31, 2003 was primarily settlements of outstanding payables and the partial discharge of debt due to an officer. As a result of all of the foregoing, we incurred a net loss for the year ended January 31, 2004 of $139,249 compared to a net loss of $668,828 for the prior fiscal year, a decrease of $529,579 or approximately 79%. Major Customers No individual customer accounted for a significant portion of revenues. Liquidity and Capital Resources At January 31, 2004, we had a negative working capital position of ($499,486), compared to negative working capital of ($514,400) at January 31, 2003 and we continue to experience cash flow difficulties. 10 Working Capital and Current Ratios were: January 31, 2004 January 31, 2003 ---------------- ---------------- Working capital ($499,486) ($514,400) Current ratios 0.021:1 0.020:1 Cash increased $4,090 for the year ended January 31, 2004 compared to a decrease of $3,511 for the prior year. During the year ended January 31, 2004 we used $136,994 of cash for operating activities compared to $966,945 of cash used for operating activities in the year ended January 31, 2003. The reason for the change was primarily the write-off of capitalized software development costs. Dividend Policy We have not declared or paid any dividends on our common stock since inception and we do not anticipate that we will be declaring or paying cash dividends in the foreseeable future. We intend to retain earnings, if any, to finance the development and expansion of our business. Future dividend policy will be subject to the discretion of our board of directors and will be contingent upon future earnings, if any, our financial condition, capital requirements, general business conditions and other factors. Therefore, we cannot assure that dividends of any kind will ever be paid. Effect of Inflation We believe that inflation has not had a material effect on our operations for the periods presented. Future Plan of Operation As of 2005, we may be considered a blank check company. We have no operations and no or nominal assets. Although we have no assets or operations, we believe we possess a stockholder base which will make us an attractive merger or acquisition candidate to an operating privately-held company seeking to become publicly-held. We intend to locate and combine with an existing, privately-held company which has profitable operations or, in our management's view, potential for earnings and appreciation of value of its equity securities, irrespective of the industry in which it is engaged. A combination may be structured as a merger, consolidation, exchange of our common stock for stock or assets or any other form which will result in the combined companies becoming an operating publicly-held corporation. Pending negotiation and consummation of a business combination, we anticipate that we will have, aside from carrying on our search for a combination partner, no business activities, and, thus, will have no source of revenue. Should we incur any significant liabilities prior to a combination with a private company, we may not be able to satisfy such liabilities as they are incurred. If our management pursues one or more combination opportunities beyond the preliminary negotiations stage and those negotiations are subsequently terminated, it is likely that such efforts will exhaust our ability to continue to seek such combination opportunities before any successful combination can be consummated. 11 In our pursuit for a business combination partner, our management intends to consider only combination candidates which are profitable or, in management's view, have growth potential. Our management does not intend to pursue any combination proposal beyond the preliminary negotiation stage with any combination candidate which does not furnish us with audited financial statements for its historical operations or can furnish audited financial statements in a timely manner. HFG may engage attorneys and/or accountants to investigate a combination candidate and to consummate a business combination. We may require payment of fees by such merger candidate to fund all or a portion of such expenses. To the extent we are unable to obtain the advice or reports from experts, the risks of any combined business combination being unsuccessful will be enhanced. We are not registered, and we do not propose to register, as an investment company under the Investment Company Act of 1940. We intend to conduct our business activities so as to avoid application of the registration and other provisions of the Investment Company Act of 1940 and the related regulations thereunder. 12 Item 7. Financial Statements The following financial statements are attached to the end of this report and 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, 2004 INDEX Page # ------ Report of Independent Certified Public Accountant F1 Consolidated Balance Sheets - January 31, 2004 and 2003 F2-F3 Consolidated Statements of Operations for Each of the Two Years in the Period Ended January 31, 2004 F4 Consolidated Statements of Changes in Stockholders' Deficiency for Each of the Two Years in the Period Ended January 31, 2004 F5 Consolidated Statements of Cash Flows for Each of the Two Years in the Period Ended January 31, 2004 F6 Notes to Financial Statements F7-F15 Schedules All schedules 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. There have been no disagreements with our independent accountants with respect to accounting and/or financial disclosure, during the past two fiscal years. We changed our independent accounting firm effective with the fiscal year ended January 31, 2003. Our auditing firm is Moore and Associates, Chartered. 13 Item 8a: CONTROLS AND PROCEDURES (a) Evaluation of Disclosure Controls and Procedures: 1. Management is responsible for establishing and maintaining adequate disclosure controls and procedures. 2. MULTI SOLUTIONS, INC. was unable to carry out an evaluation of the effectiveness of the design and operation of the Company's disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon that evaluation, the Chief Executive and Principal Accounting Officer could not conclude that the Company's disclosure controls and procedures were effective both as of the period of this report and the date of this filing, in timely alerting him to material information required to be included in the Company's periodic SEC filings relating to the Company. However, we were able to determine the following: 3. Our controls relating to disclosure and related assertions in the financial statements, particularly in the area of non-routine and non-systematic transactions were not adequate because recordkeeping was not kept up to date since January 31, 2002. However, through the use of an outside accounting consultant, we were able to correct errors and make the proper disclosures. We do not have any internal accounting staff and we will need to engage the assistance of a third party financial accounting consulting firm to prepare our accounting records and financial statements. (b) Changes in Internal Controls Over Financial Reporting: 1. We have engaged the services of a financial accounting consultant to continue to monitor and prepare accounting records and financial statements as necessary. 14 PART III Item 9. Directors, Executive Officers, Promoters and Control Persons; Compliance with Section 16(a) of the Exchange Act Name Position(s) Held as of January 31, 2005 ------------------------- ---------------------------------------------------- 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, Ph.D. Director Name Position(s) Held as of May 26, 2005 ------------------------- ---------------------------------------------------- Jerome Goubeaux Chief Executive Officer Ken Roberts Secretary Our directors are elected to serve until the next annual meeting of stockholders and until their successors have been elected and have qualified. Our 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 of our officers and directors is as follows: CHARLES J. LOMBARDO, age 59, has been our Chairman of the Board of Directors, Chief Executive Officer, Chief Financial Officer and Treasurer since August 1982. He has been Multi Soft's Chief Executive Officer, Chief Financial Officer and Treasurer since January 1985. 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 61, has been our Executive Vice President and Secretary and a member of our Board of Directors since January 1982. She has been Executive Vice President, Secretary and a Director of Multi Soft since January 1985. 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. 15 LARRY SPATZ, age 59, has been a member of our Board of Directors since July 1989, and a director of Multi Soft since May 1986. 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 72, has been a member of our Board of Directors since March 1982. Since March, 1984, Mr. Mansur also has 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 60, has been a member of our Board of Directors since July 1989. He has been a Professor of Mathematics at Southern Massachusetts University since 1968. Since 1986, he also has been a Research Associate at Harvard University. Dr. Kaput received a B.S. Degree in Mathematics from Worcester Polytechnic Institute in 1964 and a Ph.D. in Mathematics from Clark University in 1968. JEROME GOUBAUX, age 38, has served as president and director of the Registrant since April 2005. Since 1999, Mr. Goubeaux has been president of Bankstreet, Inc., a video advertising company. Prior to that, he worked in institutional sales for several large financial firms. In 1991, Mr. Goubeaux graduated from Swarthmore College in Pennsylvania with a B.A. KEN ROBERTS, age 69, has served as secretary and director of the Registrant since April 2005. Since 2001, Mr. Roberts has been president of Cero, Inc., a distributor of high-technology software products. From 1996 to 2001, he was executive vice president of BMS, Inc., a marketer of computer software for telephone back-office operations. Mr. Roberts graduated from West Virginia Wesleyan College in 1960. He received an M.A. in economics from West Virginia Wesleyan College in 1962. Section 16(a) Beneficial Ownership Reporting Compliance To our knowledge, based solely on a review of such materials as are required by the Securities and Exchange Commission, none of our officers, directors or beneficial holders of more than ten percent of our issued and outstanding shares of Common Stock has 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, 2004. 16 Item 10. Executive Compensation The following table shows all the cash compensation paid or to be paid by us and Multi Soft, as well as certain other compensation paid or accrued, during the fiscal years indicated, to our 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 $100,000. SUMMARY COMPENSATION TABLE
Long Term Compensation ---------------------------------------------- Annual Compensation Awards Payouts -------------------------------------------------------------- --------------------- ---------------------- Name & Other Annual Restricted Options LTIP All Other Principle Fiscal Compensation Stock Award Options Payouts Compensation Position Year Salary ($) Bonus ($) ($) ($) SARs ($) ($) ------------- ------ ---------- --------- ------------ ----------- ------- ------- ------------ Charles J. 2004 $ 0 $0 $ 0 $0 $0 $0 $0 Lombardo CEO 2003 $ 0 $0 $ 0 $0 $0 $0 $0 2002 $33,333 $0 $ 0 $0 $0 $0 $0 2001 $50,000 $0 (A) $ 4,167 $0 $0 $0 $0 2000 $54,167 $0 (A) $16,700 $0 $0 $0 $0 Miriam Jarney 2004 $ 0 $0 $ 0 $0 $0 $0 $0 Exec. V.P. 2003 $ 0 $0 $ 0 $0 $0 $0 $0 2002 $33,333 $0 $ 0 $0 $0 $0 $0 2001 $54,167 $0 $ 0 $0 $0 $0 $0 2000 $54,167 $0 $ 0 $0 $0 $0 $0
(A) Consulting fees The following table sets forth information with respect to the Principal Officers concerning the grants of options and Stock Appreciation Rights ("SAR") during the past fiscal year: OPTION/SAR GRANTS IN LAST FISCAL YEAR Individual Grants
Options/SARs Percent of Total Options/SARs Exercise or Base Expiration Name Granted Granted to Employees in Fiscal Year Price ($/Sh) Date ------------------- ------------ ----------------------------------- ---------------- ---------- Charles J. Lombardo -0- -- -- -- Miriam Jarney -0- -- -- --
17 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 Value Realized Options/SARs at Options/SARs at Name Exercise (#) ($) FY-End (#) FY-End ($) ------------------- ------------ -------------- -------------------- --------------- Charles J. Lombardo -0- -0- -0- -0- Miriam Jarney -0- -0- -0- -0-
Directors' Compensation Our 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 is automatically renewed for successive periods unless terminated by Multi Soft on twelve months notice or by Mr. Lombardo on six months notice. Mr. Lombardo is our Chairman of the Board, Chief Executive Officer, Chief Financial Officer and Treasurer. 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. Under Mr. Lombardo's contract he may assign any part of his salary to a third party as a consulting fee. In November 1999, we issued 250,000 shares to Mr. Lombardo in lieu of past accrued salary of Multi Soft. Mr. Lombardo also is entitled to a salary from us of $25,000 per year, which he has agreed to forego since fiscal 1997. 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 Multi Solutions. This agreement is automatically 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. 18 In January of 1996, we issued 1,000,000 shares of our common stock to Mrs. Jarney in lieu of accrued salary of Multi Soft. In November 1999, we issued 250,000 shares to Ms. Jarney in lieu of past accrued salary of Multi Soft. Through fiscal 1997, Mr. Lombardo and Ms. Jarney accrued a portion of their Multi Soft salaries. The balance due between both officers as of January 31, 2000, on a consolidated basis, is $792,797 including deferred increases of $586,605. Since fiscal 1999, Mr. Lombardo and Ms. Jarney have relinquished that portion of their annual compensation that was owed but not paid for fiscal 1998 through fiscal 2000. All accrued deferred officer compensation aggregating $720,273 was forgiven during the fiscal year ended January 31, 2005. Item 11. Security Ownership of Certain Beneficial Owners and Management Security Ownership of Management -- The number and percentage of shares of our common stock owned of record and beneficially by each owner of 5% or more of our common stock, each of our officers and directors and by all of our officers and directors as a group are set forth on the chart below. Amount and Nature of Beneficial Percent of Name and Address of Beneficial Owner Ownership Class (1) ----------------------------------------------- ----------------- ---------- Charles J. Lombardo 4,389,272(2) 20.8% Chairman of the Board, Chief Executive Officer, Chief Financial Officer, & Treasurer 1511 Laurie Lane, Yardley, PA 19067 Miriam G. Jarney 1,989,100(3) 9.4% 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 Robert L. Frome 24,613,131 (5) c/o Olshan Grundman Frome et al. 65 East 55th Street New York, NY 10022 Bridge Ventures, Inc. 24,613,131 (5) 1241 Gulf of Mexico Dr. Sarasota, FL 34228 Michael Potter 24,613,131 (5) c/o Olshan Grundman Frome et al. 65 East 55th Street New York, NY 10022 Jerome Goubeaux 2,461,313 (6) 41 John Street New York, NY 10038 Ken Roberts 527,424 (6) 7115 Boulevard East North Bergen, NJ 07047 All Executive Officers and Directors as a group (5 persons)(7) 6,395,515(4) 30.3% 19 ** Less than one percent. (1) Based upon 21,096,969 shares of common stock outstanding on October 17, 2006. (2) Includes shares held by Mr. Lombardo's wife and shares owned jointly with his wife. (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 us that neither he nor his wife has any voting or dispositive power with regard to the shares owned by the trust. (5) Represents shares of common stock issuable upon conversion of the Company's 6% Convertible Non-Negotiable Debentures ("Debentures"). Although insufficient amounts of common stock are authorized to allow full conversion of the Debentures, the Company will effectuate an increase in the authorized shares to permit such conversion. At that time, each of Robert L. Frome, Bridge Ventures, Inc., and Michael Potter will own approximately 26% of the outstanding common stock. (6) In June 2005, the Company accepted subscriptions from Jerome Goubeaux and Ken Roberts for the respective amounts of common stock shown. These shares have not been issued. (7) Does not include Jerome Goubeaux and Ken Roberts (See footnote 6 above). Item 12. Certain Relationships and Related Transactions Although there is no written agreement between us and Multi Soft granting us preemptive rights with regard to our majority ownership of Multi Soft common stock, in practice, we have acquired sufficient shares of Multi Soft's common stock to assure our majority ownership in Multi Soft. However, in a transaction which occurred in April 2005 convertible debentures were issued by Multi Soft which, if converted, would rest control with the debenture holder and we do not expect to be able to acquire sufficient shares to retain our majority ownership. 20 Item 13. Exhibits and Reports on Form 8-K Exhibits 3.a Certificate of Incorporation (1) 3.b By-Laws (1) 4.a Specimen Common Stock (1) 10.a Our 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 Copy of Non-Qualified Stock Option Plan, Stock Grant Program and Employee Incentive Stock Option Plan (3) 10.g Amendments to Non-Qualified Stock Option and Stock Grant Program (4) 21. List of Subsidiaries (6) ---------- 1. Previously filed as an Exhibit to our 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 our 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 our 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 our 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. 6. Previously filed as an Exhibit to our Form 10-KSB for the fiscal year ended January 31, 2000 as filed with the Commission on or about May 15, 2000, under SEC File No. 0-12162, 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, 2004. However, we filed a report Form 8-K on October 14, 2005 in connection with the sale of convertible debenture and departures/elections of officers and directors. Item 14: Audit fees Aggregate fees bills by the Company's former principal accountant were $NIL during the fiscal year ended January 31, 2004 and $15,000 during the fiscal year ended January 31, 2003. Audit-Related Fees There were no audit related fees in either period. 21 Audit Committee Policies and Procedures for Pre-Approval of Services The board in lieu of a formal audit committee is in the process of formulating procedures for pre-approval of all audit, review and attest services and non-audit services. 22 SUPPLEMENTAL INFORMATION Supplemental Information to be Furnished With Reports Filed Pursuant to Section 15(d) of the Act by Registrants Which Have Not Registered Securities Pursuant to Section 12 of the Act. Not Applicable. 23 MOORE & ASSOCIATES, CHARTERED ACCOUNTANTS AND ADVISORS PCAOB REGISTERED REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Board of Directors Multi Solutions Inc and Subsidiaries We have audited the accompanying consolidated balance sheet of Multi Solutions Inc and Subsidiaries as of January 31, 2004 and 2003, and the related statements of operations, stockholders' equity and cash flows through January 31, 2004 and 2003 and 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 audits. We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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 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 Multi Solutions, Inc and Subsidiaries as of January 31, 2004 and 2003 and the results of its operations and its cash flows through January 31, 2004 and 2003 and the years then ended, in conformity with accounting principles generally accepted in the United States of America. The accompanying consolidated financial statements have been prepared assuming that the Company and its subsidiaries will continue as a going concern. As discussed in Note A to the financial statements, the Company and its subsidiaries has suffered losses from operations and have working capital deficiencies as of January 31, 2004 raising substantial doubt about its ability to continue as a going concern. Management's plans concerning these matters are also described in Note A. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. /s/ Moore & Associates, Chartered Moore & Associates Chartered Las Vegas, Nevada October 30, 2006 2675 S. Jones Blvd. Suite 109, Las Vegas, NV 89146 (702) 253-7511 Fax (702) 253-7501 -F1- MULTI SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS January 31, 2004 and 2003 January 31, January 31, 2004 2003 ----------- ----------- ASSETS CURRENT ASSETS Cash $ 4,090 $ -- Accounts Receivable -- 3,440 Prepaid expenses and other current assets 6,812 6,812 ----------- ----------- 10,902 10,252 ----------- ----------- FURNITURE AND EQUIPMENT Research and Development Equipment 4,659 22,063 Office furniture and other equipment 10,528 16,462 ----------- ----------- 15,187 38,525 Less: Accumulated Depreciation (6,790) (6,790) ----------- ----------- 8,397 31,735 ----------- ----------- OTHER ASSETS Capitalized software development costs 1,702,582 1,702,582 Less accumulated amortization (1,355,980) (1,201,516) Less valuation allowance (234,000) (258,000) ----------- ----------- 112,602 243,066 ----------- ----------- $ 131,901 $ 285,053 =========== =========== THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS -F2- MULTI SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS January 31, 2004 and 2003
January 31, January 31, 2004 2003 ------------ ------------ LIABILITIES AND STOCKHOLDERS' DEFICIENCY CURRENT LIABILITIES Overdraft $ -- $ 7,947 Litigation judgment payable - NetCast subsidiary 113,000 113,000 Payroll and other taxes payable 28,399 26,792 Accounts Payable, Accrued expenses and other Current Liabilities 123,017 130,415 Accrued officer compensation 133,668 133,668 Due to officer 68,201 57,319 Deferred Revenues 44,463 55,511 ------------ ------------ 510,748 524,652 ------------ ------------ Deferred compensation due officer /shareholders 586,605 586,605 Minority interest in subsidiaries 811,992 811,992 STOCKHOLDERS' DEFICIENCY Common stock, authorized 40,000,000 shares $.001 par value, issued and outstanding 21,096,969 and 21,096,969 respectively 21,098 21,098 Additional paid-in capital 9,232,227 9,232,227 Accumulated deficit (11,030,769) (10,891,521) ------------ ------------ (1,777,444) (1,638,196) ------------ ------------ $ 131,901 $ 285,053 ============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS -F3- MULTI SOLUTIONS, INC AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended January 31, ------------------------- 2004 2003 ----------- ----------- REVENUES License fees $ 48,887 $ 9,634 Maintenance fees 87,852 126,329 Consulting and Other fees -- 11,180 ----------- ----------- Total revenues 136,739 147,143 EXPENSES Software development and technical support 134,338 137,224 Provision to write-down previously capitalized software costs -- 620,634 Selling and administrative 141,650 225,641 ----------- ----------- Total expenses 275,988 983,499 ----------- ----------- (Loss) from operations (139,249) (836,356) OTHER INCOME (EXPENSE) Settlements of previously recorded accounts payable -- 41,857 Discharge by officer of loans payable to him -- 20,300 Minority share of consolidated subsidiary's loss -- 105,371 ----------- ----------- Total other income -- 167,528 ----------- ----------- Net (loss) $ (139,249) $ (668,828) =========== =========== Weighted average shares outstanding 21,096,969 21,096,969 =========== =========== Income (Loss) per share $ (0.01) $ (0.03) =========== ===========
Some per share amounts may be less than $.01 and will appear as $0 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS -F4- MULTI SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY Years ended January 31, 2004 and 2003
Common Stock Additional Total -------------------- paid-in Accumulated Deferred Stockholders' Shares Amount capital deficit Compensation Deficiency ---------- ------- ---------- ------------ ------------ ------------- Balance at January 31, 2002 21,096,969 $21,098 $9,232,227 $(10,117,322) ($12,695) ($876,692) Amortization of stock grants 12,695 12,695 Net loss (774,199) (774,199) ---------- ------- ---------- ------------ --------- ----------- Balance at January 31, 2003 21,096,969 $21,098 $9,232,227 $(10,891,521) $ -- $(1,638,196) Net loss (139,249) (139,249) ---------- ------- ---------- ------------ --------- ----------- Balance at January 31, 2004 21,096,969 $21,098 $9,232,227 $(11,030,769) $ -- $(1,777,444) ========== ======= ========== ============ ========= ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS -F5- MULTI SOLUTIONS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended January 31, --------------------- 2004 2003 --------- --------- Cash flows from operating activities Net (loss) $(139,249) $(774,199) Adjustments to reconcile net income to net cash provided by operating activities Depreciation and amortization 4,772 4,375 Changes in assets and liabilities Loss on sale of marketable securities -- -- Accounts receivable 3,440 19,551 Prepaid expenses and other current assets -- 20,884 Accrued payroll -- (81,817) Payroll and other taxes payable 1,607 (1,797) Accounts payable and accrued expenses (7,398) (96,373) Accrued officer compensation -- (45,000) Due to officer 10,882 4,472 Deferred revenues (11,048) (17,041) --------- --------- Net cash provided (used) by operating activities (136,994) (966,945) --------- --------- Cash flows from investing activities Disposal and abandonment of property and fixtures 18,566 13,995 Capital expenditures -- -- Change in capitalized software development costs 130,464 750,797 Sales of marketable securities -- -- --------- --------- Net cash used in investing activities 149,030 764,792 --------- --------- Cash flows from financing activities -- Increase in overdraft (7,947) 7,947 Expired and forfeited stock Grants -- 12,695 Minority interest and loss in excess of investments -- 178,000 --------- --------- Net cash provided (used) by financing activities (7,947) 198,642 --------- --------- NET INCREASE (DECREASE) IN CASH 4,090 (3,511) Cash at beginning of year -- 3,511 --------- --------- Cash at end of period $ 4,090 $ (0) ========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS -F6- Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2004 and 2003 NOTE A - FINANCIAL STATEMENTS - BASIS OF REPORTING 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 Company ceased operations in March 2005, disposed of or abandoned assets but continues to owe significant liabilities. There were significant losses from operations which occurred in this period and continued until operations ceased. The Company incurred losses of $139,249 for the year ended January 31, 2004 and no longer has cash reserves. Stockholders' deficiency as of July 31, 2006 was approximately $1,970,000 as compared to approximately $877,000 as of January 31, 2002, which is mostly the result of losses from the period of February 1, 2002 through July 31, 2006 of approximately $1,100,000. Current liabilities still exceed cash and receivables by approximately $252,000 as of July 31, 2006 indicating that the Company will not be able to meet its financial obligations for the foreseeable future. These factors indicate that the Company will not continue as a going concern unless it is acquired in a reverse merger transaction. Current management is seeking acquisition of the Company through a reverse merger transaction The Company believes that these measures may provide sufficient liquidity for it to continue as a going concern. We operated primarily through our subsidiaries: Our Approximate Name of Subsidiary Percentage Ownership ------------------ -------------------- Multi Soft, Inc. 51.3% FreeTrek, Inc. 45.8% NetCast, Inc. 75%. Our financial statements are consolidated with our subsidiaries. In January 2000, the operations of NetCast were discontinued. In January 2003, the operations of FreeTrek were discontinued. In March 2005, the operations of Multi Soft were discontinued and the Company ceased all operations except for obtaining additional financing and continuing efforts to find an acquirer. 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, FreeTrek and NetCast. All significant intercompany balances and transactions have been eliminated in consolidation. -F7- Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2004 and 2003 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. 3. Capitalization of Computer Software Development Costs 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. Multi Soft's Windows products are compatible with Windows 98, 2000 and NT. The Company's software engineers are continually modifying and enhancing the existing software products and developing new versions. Unamortized costs relating to Windows products at January 31, 2004 were $112,602 (net of valuation allowance of $234,000). During the quarter ended April 31, 2002, the capitalized development costs were written down to the net value expected to be realized through all future periods. The capitalized development costs for FreeTrek were written off during the quarter ended April 30, 2002 as we later determined that the costs would never be realized. 4. Revenue Recognition In accordance with Statement of Position 97-2, "Software Revenue Recognition" (SOP 97-2), 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. -F8- Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2004 and 2003 6. Income (Loss) Per Share The Company complies with the requirements of the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS No. 128"). SFAS No. 128 specifies the compilation, presentation and disclosure requirements for earnings per share for entities with publicly held common stock or potential common stock. Net loss per common share - basic and diluted is determined by dividing the net loss by the weighted average number of common stock outstanding. Net loss per common share - diluted does not include potential common shares derived from stock options and warrants (see Note C) because they are antidilutive. 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 those 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. 9. Valuation of long-lived assets The Company reviews long-lived assets held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. The Company has recorded provision for the impairment of long-lived assets at January 31, 2004 as follows: capitalized software development costs - $234,000 and; amounts due from affiliates - $200,000. 10. Risks, uncertainties and certain concentrations of credit risk and economic dependency The Company's future results of operations involve a number of significant risks and uncertainties. Factors that could affect the Company's future operating results and cause actual results to vary materially from expectations include, but are not limited to, dependence on key personnel, dependence on a limited number of customers, ability to design new products and product obsolescence, ability to generate consistent sales, ability to finance research and development, government regulation, technological innovations and acceptance, competition, reliance on certain vendors, credit and other risks. -F9- Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2004 and 2003 Financial instruments, which potentially subject the Company to concentrations of credit risk, consist principally of cash and accounts receivable. The Company maintains cash and cash equivalents in bank deposit and money market accounts in one bank, which, at times, may exceed federally insured limits or not be insured. The Company has not experienced any losses in such accounts and does not believe it is exposed to any significant credit risk on cash and cash equivalents. 11. Impact of Recent Accounting Pronouncements In May 2005, the Financial Accounting Standards Board ("FASB") issued Statement No. 154, "Accounting Changes and Corrections - A Replacement of APB No. 29 and FASB No. 3." The statement changes the requirements for the accounting for and reporting of a change in accounting principles. This Statement applies to all voluntary changes in accounting principles. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions those provisions should be followed. Opinion 20 previously required that most voluntary changes in accounting principle be recognized by including in net income of the period of the change the cumulative effect of changing to the new accounting principle. This Statement requires retrospective application to prior periods' financial statements of changes in accounting principle, unless it is impracticable to determine either the period-specific effects or the cumulative effect of the change. When it is impracticable to determine the period-specific effects of an accounting change on one or more individual prior periods presented, this Statement requires that the new accounting principle be applied to the balances of assets and liabilities as of the beginning of the earliest period for which retrospective application is practicable and that a corresponding adjustment be made to the opening balance of retained earnings (or other appropriate components of equity or net assets in the statement of financial position) for that period rather than being reported in an income statement. When it is impracticable to determine the cumulative effect of applying a change in accounting principle to all prior periods, this Statement requires that the new accounting principle be applied as if it were adopted prospectively from the earliest date practicable. The Statement is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. Early adoption is permitted for accounting changes and corrections of errors made in fiscal years beginning after the date this Statement is issued. In December 2004, the FASB issued a revision of FASB Statement No. 123, "Accounting for Stock-Based Compensation". This Statement supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees", and its related implementation guidance. This statement establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods and services. It also addresses transactions in which an entity incurs liabilities in exchange for goods and services that are based on the fair value of the entity's equity investments or that may be settled by the issuance of those equity instruments. This statement focuses primarily on accounting transactions in which an entity obtains employee services in share-based payment transactions. This statement requires all share based payments to employees including grants of employee stock options, to be recognized in the financial statements. The proforma disclosures previously permitted will no longer be an alternative to financial statement recognition. For public entities that file as small business issuers, this statement is effective as of the beginning of the first interim period or annual reporting period that begins after December 31, 2005. We will adopt this new standard effective for the first quarter of 2006. Future compensation expense may be impacted by various factors including the number of options granted and their related fair value at the date of grant. -F10- Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2004 and 2003 In December, 2004, the FASB issued Statement No. 153 "Exchange of Nonmonetary Assets - an amendment to APB Opinion No. 29". The guidance in APB No. 29, Accounting for Nonmonetary Transactions, is based on the principle that exchanges of nonmonetary assets should be measured on the fair value of the assets exchanged. The guidance in that Opinion, however, included certain exceptions to that principle. This statement amends Opinion 29 to eliminate the exception for the nonmonetary exchanges of similar productive assets and replaces it with a general exception for exchanges of nonmonetary assets that do not have commercial substance. A nonmonetary exchange has commercial substance if the future cash flows of the entity are expected to change significantly as a result of the exchange. The provisions of this statement are effective for nonmonetary exchanges occurring in fiscal periods beginning after June 15, 2005. Management does not believe the adoption of this statement will have any material effect on the Company. In November, 2004, the FASB issued Statement No. 151, "Inventory Costs - an amendment of ARB No. 43, Chapter 4". This statement amends the guidance in ARB No. 43, Chapter 4, "Inventory Pricing", to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted material (spoilage). Paragraph 5 of ARB 43, Chapter 4, previously stated that "under some circumstances, items such as idle facility expense, excessive spoilage, double freight, and rehandling costs may be so abnormal as to require treatment as current period charges." This statement requires that those items be recognized as current-period charges regardless of whether they meet the criterion of "so abnormal." In addition, this statement requires that allocation of fixed production overheads to the costs of conversion be based on the normal capacity of the production facilities. This statement is effective for inventory costs incurred during fiscal years beginning after June 15, 2005. Management does not believe the adoption of this statement will have any material effect on the Company. NOTE C - LITIGATION From time to time, the Company is party to what it believes are routine litigation and proceedings that may be considered as part of the ordinary course of its business. Except for the proceedings noted below, the Company is not aware of any pending litigation or proceedings that could have a material effect on the Company's results of operations or financial condition. As of October 17, 2006, there is one outstanding judgment against the Company: o New York State Department of Taxation and Finance for $1,275 filed on May 24, 2004. -F11- Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2004 and 2003 As of October 17, 2006, there are four outstanding judgments against Multi Soft, Inc.: o New York State Department of Taxation and Finance for $13,889 filed on March 26, 2002. o New York State Department of Taxation and Finance for $6,691 filed on April 22, 1994. o State of New Jersey for $5,183.78 filed August 24, 1994. o A commercial service provider for $15,972 filed on March 14, 2003. All of the above mentioned judgments are reflected in the balance sheets under various captions in current liabilities. In May 1997, a lawsuit was commenced against NetCast by former consultants for approximately $113,000. The Company vigorously defended the lawsuit. During the fiscal year ended January 31, 2000 this lawsuit was found in favor of the plaintiff. Although NetCast is liable for the damages from this lawsuit, it has no assets and has discontinued operations. Consequently, no future income will be earned and NetCast will never have any assets. The Company is not liable for the debts of NetCast. The liability for this award has been included in the consolidated financial statements under the caption "Litigation judgment payable - NetCast subsidiary". NOTE D - STOCKHOLDERS' DEFICIENCY Stock and Option Compensation 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, $0.001 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 1,477,380 shares has been issued pursuant to the Plan. Prior Period Adjustment Effective for the quarter ended April 30, 2002, the Company determined that the liability of $113,000 for the NetCast litigation judgment awarded during the fiscal year ended January 31, 2000, should have been recorded and reflected on the consolidated balance sheets. Accordingly, the opening accumulated deficit was adjusted by the previously omitted liability of $113,000. NOTE E - COMMITMENTS AND OTHER COMMENTS Operating Leases: In February 2002, Multi Soft entered into an office lease for a two-year term through February 14, 2004. The lease requires monthly payments of $2,000 through January 2003 and $2,125 from February 2003 through January 2004. The Company has deposited $6,000 as security with the landlord. -F12- Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2004 and 2003 Employment Agreements: Multi Soft has employment agreements with two officers which provide aggregate minimum annual compensation of $200,000 through July 1999, and which are automatically renewed annually. These officers, Charles Lombardo and Miriam Jarney, have each relinquished unpaid salaries. 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. Mr. Lombardo and Ms. Jarney have agreed to forego this additional compensation since fiscal 1997. NetCast 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 developed certain software products and attempted to raise private funding for its operations. In January 2000 the Board of Directors decided to discontinue any further operations of NetCast, Inc. with the result that a loss from discontinued operations in the amount of $87,462 was reflected in the statement of operations for the fiscal year ended January 31, 2000. NOTE F - SUPPLEMENTAL INFORMATION Supplemental disclosures of cash flow information for the years ended January 31, 2004 and 2003 are as follows: 2004 2003 ---- ---- Cash paid during the year for interest $NIL $NIL Cash paid during the year for income taxes $NIL $NIL NOTE G - INCOME TAXES The Company and its subsidiaries are delinquent in filing Federal and state income tax returns. The last tax returns filed were for the year ended January 31, 2002. As a result of losses incurred in recent years, the Company and its subsidiaries separately have net operating loss carry-forwards available to offset future federal taxable income of approximately $8.1 million as of January 31, 2002 (estimated at approximately $9 million at January 31, 2006, after the filing of tax returns which has not as yet been done). These losses expire at various dates through 2022. Because of the uncertainty in the Company's ability to utilize the net operating loss carryforwards, a full valuation allowance of approximately $2,754,000 has been provided on the deferred tax asset. Internal Revenue Code Section 382 places a limitation on the utilization of Federal net operating loss and other credit carryforwards when an ownership change, as defined by the tax law, occurs. Generally, this occurs when a greater than 50 percentage point change in ownership occurs. Accordingly, the actual utilization of the net operating loss carryforwards and other deferred tax assets for tax purposes may be limited annually under Code Section 382 to a percentage (about 5%) of the fair market value of the Company at the time of any such ownership change. Once the ownership changes referred to in Subsequent Events herein are effectuated, the Company may no longer be able to utilize the net operating loss carryovers. -F13- Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2004 and 2003 The Company adopted, effective February 1, 1993, SFAS No. 109, "Accounting for Income Taxes." Under the liability method specified by SFAS No. 109, "Accounting for Income Taxes" 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. Due to the aforementioned net operating loss carryovers, there is no deferred or current tax expense, nor any tax assets or tax liabilities. NOTE H - RELATED PARTY TRANSACTIONS Multi Soft, from time to time, paid incidental expenses of Multi Solutions and allocates its share of certain overhead items. These items are charged to an intercompany receivable. Multi Soft has not been receiving payments of these balances. The balance due from Multi Solutions was $377,591 as of January 31, 2004. Multi Soft provided certain services and office space to NetCast, Inc., a subsidiary of Multi Solutions. NetCast discontinued its operations so no reimbursement of these amounts is expected. Multi Soft provided office space, consulting and administrative services to FreeTrek. Inc. Multi Soft billed FreeTrek for these services and expense allocations, but was never collected and was written off. All of these transactions were eliminated in consolidation. NOTE I - SUBSEQUENT EVENTS SECURITY PURCHASE AGREEMENT On April 25, 2005, the Company entered into a Security Purchase Agreement among Robert L. Frome, Bridge Ventures, Inc. (the "Purchasers"), Multi Soft, and two principal shareholders of the Company and Multi Soft, Charles J. Lombardo, former chairman, president, and CEO of the Company ("Lombardo"), and Miriam G. Jarney, executive vice president and director of the Company ("Jarney") (the "Agreement"). Pursuant to the Agreement, Multi Solutions issued $70,000 principal amount of its 6% Convertible Debentures due May 1, 2006 ("Multi Debentures") to the Purchasers, and Multi Soft issued $24,000 principal amount of its 6% Convertible Debentures due May 1, 2006 ("Multi Soft Debentures") to the Purchasers. The Agreement provided for, among things, (a) repayment of certain liabilities totaling $94,000 of both the Company and Multi Soft, (b) the resignation of Lombardo and Jarney as principal executive officers and directors, and (c) certain preemption rights between the Purchasers and shareholders of the Company and Multi Soft. -F14- Multi Solutions, Inc. and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS January 31, 2004 and 2003 The Multi Debentures are convertible into 49,226,262 shares of the Company's common stock, $.001 par value. The Multi Soft Debentures are convertible into 31,988,980 shares of Multi Soft common stock, $.001 par value. As of the date of this Report, the Company has 40,000,000 shares of authorized common stock, with 21,096,969 shares outstanding. Multi Soft has 30,000,000 shares of authorized common stock, with 13,709,477 shares outstanding. Pursuant to the Agreement, the Company and Multi Soft appointed Jerome Goubeaux as President and director, and Ken Roberts as Secretary and director: the sole officers and directors for each company. On May 27, 2005, the Company and Multi Soft entered into a Debenture Purchase Agreement with Michael Potter ("Potter") - whereby the Company issued to Potter $35,000 principal amount of its Multi Debentures, and Multi Soft issued $12,000 principal amount of its Multi Soft Debentures. Although insufficient amounts of common stock are authorized to allow full conversion of the Multi and Multi Soft Debentures, the Agreement provided for voting proxies from Lombardo and Jarney to the Purchasers to facilitate amending the companies' articles of incorporation. Subsequent to amending the Company's and Multi Soft's articles of incorporation to increase the authorized shares, and assuming the full conversion of Multi and Multi Soft Debentures, the Purchasers will own approximately 52% of the Company and Multi Soft outstanding common stock, and Potter will own approximately 26% of the Company and Multi Soft outstanding common stock. REGULATORY COMMUNICATIONS On July 27, 2005, the Company received a letter from the Securities and Exchange Commission, notifying the Company that it was subject to deregistration pursuant to Section 12 of the Exchange Act for failure to comply with SEC reporting requirements. The Company responded and provided the SEC with a timetable for filing all delinquent reports and to comply with the Exchange Act by October 31, 2006. The Company believes it will be able to comply with the Exchange Act by October 31, 2006, but there can be no assurance that it will comply, or that its compliance will be sufficient to forestall deregistration. SHARE BASED COMPENSATION On September 15, 2006, the Board of Directors resolved to compensate the company's internal accountant for services rendered as follows: issue 1,050,000 shares of the Company's common stock and cashless warrants for the purchase of 3,930,000 shares of the Company's common stock exercisable at $.001 per share. Also on the date, the Board of Directors of Multi Soft, Inc. resolved to compensate the company's internal accountant for services rendered as follows: issue 675,000 shares of Multi Soft, Inc. common stock and cashless warrants for the purchase of 2,565,000 shares of Multi Soft, Inc. common stock exercisable at $.001 per share. -F15- SIGNATURES In accordance with the requirements of the Exchange Act, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MULTI SOLUTIONS, INC. Dated: October 30, 2006 By: /s/ Jerome Goubeaux ------------------------------------ Name: Jerome Goubeaux Title: President and Director Dated: October 30, 2006 By: /s/ Ken Roberts ------------------------------------ Name: Ken Roberts Title: Secretary and Director i