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, 1996 Commission File No. 0-12162
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New Jersey 22-2418056
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
MULTI SOLUTIONS, INC
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(Name of Small business issuer in its charter)
4262 US Route 1, Monmouth Junction, New Jersey 08852
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (908) 329-9200
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Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act: Common Stock
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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
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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: $1,399,180.
The aggregate market value of the voting stock held by non-affiliates (1) of the
registrant based on the average between the high ($.12) and low ($.02) bid price
of such stock, as of April 30, 1996 is $803,827 based upon $.07 multiplied by
the 11,483,241 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 30, 1996, is 17,806,898 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
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MULTI SOLUTIONS, INC.
Form 10-KSB
Year Ended January 31, 1996
Table of Contents
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Page
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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......................................................................14
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.................14
Item 10. Executive Compensation..............................................16
Item 11. Security Ownership of Certain Beneficial Owners and Management......18
Item 12. Certain Relationships and Related Transactions......................20
PART IV.......................................................................22
Item 13. Exhibits and Reports on Form 8-K....................................22
Signatures....................................................................24
Financial Statements..........................................................F1
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PART I
Item 1. Business.
General
During the fiscal year ended January 31, 1996, 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. From September, 1988 until February,
1993, the Company had been marketing a software program, developed by its
Chairman, called Hyper-Action. The Company no longer markets this program.
Licensing Agreement with Former Officer of Multi Solutions
Effective August 31, 1991 the Company entered with a licensing agreement
with Widow, Inc, a corporation whose president was a former officer of Multi
Solutions, Inc. The fee for the licensing rights which was received by the
Company was $20,000. Pursuant to the license agreement, Widow has limited rights
to further develop, market, and sell the SI products and should Widow
successfully generate sales, the Company would be entitled to royalties on such
sales.
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 56.8% 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 LibraryTM (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").
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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").
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 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.
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.
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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 a wide array of 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.
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 staffed by
knowledgeable personnel trained and experienced with the Multi Soft product
line. An online bulletin board system is also used to augment hotline and fax
support to customers.
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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 and Australia. These
organizations include: Ferntree Computer Services (Australia), 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 it 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 ServerTM for Windows. Specifically modified
for use with IBM mainframe systems, IMS Client ServerTM 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. As of April 1996, Multi Soft has been
receiving monthly maintenance from the above contract.
Multi Soft and IBM also have entered into International Marketing Agreements
to market Multi Soft's WCL Toolkit under the name IMS Client Server ToolkitTM
for Windows in the United States, Puerto Rico, the Asian Pacific Region, Europe,
the Middle East, Africa and Canada. IMS Client Server ToolkitTM facilitates the
generation of client application which run with IMS Client ServerTM for Windows.
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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.
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. Management expects but cannot assure that, as the IBM relationship
matures, significant revenues will be generated by IBM and Multi Soft's product
sales base will continue to expand. In addition, management expects that, as the
products sales base expands, so will the subsequent maintenance and support
revenue.
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, 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. Also, it
provides for a joint marketing agreement in which both companies will share
marketing royalties.
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.
Multi Soft's products provide front-ending, client-server and cooperative
processing technologies which Multi Soft believes represent a significant
advance over other products being marketed.
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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 and $4,750 during the third
year. Multi Soft is responsible for all utilities.
Item 3. Legal Proceedings.
The Company is not presently a party to any material litigation; however,
Multi Soft was a party in the following matters:
Tax Liens
As of January 31, 1996 Federal tax was paid in full and tax liens were
released. Certain State taxes, interest, and penalties aggregating $26,000
remained unpaid.
Litigation
Multi Soft was a defendant in a lawsuit for a defaulted real property lease
regarding facilities no longer occupied by Multi Soft. Pursuant to a settlement
between the landlord and Multi Soft, Multi Soft is obligated to pay $30,000 over
an 18 month period. As of the date hereof, Multi Soft is in full compliance with
this settlement. The balance remaining on this settlement is approximatley
$3,339.
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, 1996.
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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 1995 High Low
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First Quarter ending April 30, 1994 .58 1/8
Second Quarter ending July 31, 1994 .26 .05
Third Quarter ending October 31, 1994 .18 .05
Fourth Quarter ending January 31, 1995 .16 .03
Period - Fiscal Year 1996 High Low
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First Quarter ending April 30, 1995 .07 .02
Second Quarter ending July 31, 1995 .12 .05
Third Quarter ending October 31, 1995 .10 .05
Fourth Quarter ending January 31, 1996 .10 .02
(b) Holders -- There were approximately 872 holders of record of the
Company's Common Stock, 190 holders of record of the Class A Warrants, 1 holder
of record of the Class B Warrants and 55 holders of record of the Class C
Warrants as of May 8, 1996, 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.
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Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Fiscal Year Ended January 31, 1996 Compared to Fiscal Year Ended January 31,
1995
Revenues for the fiscal year ended January 31, 1996 were $1,399,180 as
compared to $939,195 in fiscal year 1995, an increase of $459,985 (49%).This
increase is primarily due to a 138% increase in revenues from license fees from
$340,832 to $812,069, much of which come from the companies largest customers.
In fiscal 1996, Multi Soft's two principal sources of revenues were license
fees and maintenance fees which represented approximately 58% ($812,069) and
40.3% ($545,977) percent of revenues in 1996, respectively.
Revenues in fiscal 1996 include $192,856 of the $300,000 nonrefundable
royalty payment advance from IBM (see Note I to the financial statements as of,
and for the year ended January 31, 1996).
Management believes that the growth in maintenance fees during the year ended
January 31, 1996 is due to an increase in requests from customers for product
updates, technical assistance and support.
Operating expenses decreased 9.3% from fiscal 1995 ($1,575,198) to fiscal
1996 ($1,428,876) primarily as a result of a decrease in selling and
administrative costs. The increase in software development costs is principally
due to an increase in the base of capitalized development costs.
Other income (expenses) changed from $11,695 in fiscal 1995 to $49,249 in
fiscal 1996. 1995 includes special discount to investors of ($28,215). Also,
settlements of previously written off accounts payable is included as other
income in the amount of $45,630 for 1995 and $54,782 for 1996.
As a result of all of the foregoing, the Company's income in fiscal 1996
$21,553 improved substantially compared to its loss in 1995 ($624,308).
Major Customers
In fiscal 1996, IBM accounted for 42% of total revenues. In fiscal 1995, IBM
accounted for 33% of total revenues.
Liquidity and Capital Resources
At January 31, 1996, the Company had a working capital deficiency of
($1,215,809) and has experienced cash flow problems.
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Management of Multi Soft has taken 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.
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 WCLTM. 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 (see "Item 1.
Business - IBM").
It is Multi Soft's intent to remain a technology provider and search out
multiple distribution channels, 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, 1996 January 31, 1995
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Working capital (deficiency) ($1,215,809) ($1,251,736)
Current ratios .14:1.0 .09:1.0
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.
Effect of Inflation
Management believes that inflation has not had a material effect on its
operations for the periods presented.
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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.
FINANCIAL STATEMENTS
FISCAL YEAR ENDED January 31, 1996
INDEX
Page #
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Report of Independent Certified Public Accountant F1
Balance Sheets - January 31, 1996 and 1995 F2, F3
Statements of Operations for Each of the Years in the
Period Ended January 31, 1996 F4
Statements of Changes in Stockholders' Equity (Deficiency)
for Each of the Two Years in the Period Ended January 31, 1996 F5
Statements of Cash Flows for Each of the Two Years in the
Period Ended January 31, 1996 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.
On March 15, 1994, the Company terminated Stewart W. Robinson as its
certifying accountant and retained Grant Thornton as its certifying accountants.
In connection with the audit of the financial statements of the Company for
the fiscal year ended January 31, 1993 and during the period commencing February
1, 1993 through March 15, 1994 there were no disagreements with Stewart W.
Robinson on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Stewart W. Robinson, would have caused him
to make reference to the subject matter of the disagreement in his report.
Except for an explanatory paragraph concerning the Company's ability to
continue as a going concern, Stewart W. Robinson's report on the Company's
financial statements for the fiscal year ended January 31, 1993 did not contain
an adverse opinion or disclaimer of opinion, nor was it modified as to
uncertainty, audit scope or accounting principles.
The decision to change accountants was approved by the Board of Directors of
the Company.
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On April 25, 1995, the company terminated Grant Thornton as its certifying
accountants and retained Stewart W. Robinson as its accountant.
In connection with the audit of the financial statements of the Company for the
year ended January 31, 1994 and during the period commencing February 1, 1994
through April 25, 1995, there were no disagreements with Grant Thornton on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreements, if not resolved to the
satisfaction of Grant Thornton would have caused them to make reference to the
subject matter of the disagreement in their report.
Except for an explanatory paragraph concerning the Company's ability to continue
as a going concern, Grant Thornton's report on the Company's financial
statements for the fiscal year ended January 31, 1994 did not contain an adverse
opinion or disclaimer of opinion, nor was it modified as to uncertainty, audit
scope or accounting principles.
The decision to change accountants was approved by the Board of Directors of the
Company.
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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 53, 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 55, 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,
- 14 -
<PAGE>
Dedicated Systems, Inc., for the purpose of packaging computer software for the
microprocessor market, which company is inactive.
LARRY SPATZ, age 52, 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 66, 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 55, 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.
Compliance With Section 16(a) of The Securities Exchange Act of 1934
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, 1996.
- 15 -
<PAGE>
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 $100,000.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
=======================================================================================================
Annual Compensation Long Term Compensation
- -------------------------------------------------------------------------------------------------------
Awards Payouts
=======================================================================================================
Name & Fiscal Salary Bonus Other An- Restricted Options LTIP All
Principle Year ($) ($) nual Com- Stock SARs Payouts Other
Position pensation Award ($) Compensa-
($) ($) tion ($)
=======================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Charles J. 1996 (A)$129,505 $0 (C)$36,750 $0 $0 $0 $0
Lombardo 1995 $129,505 $0 $0 $0 $0 $0 $0
CEO 1994 $128,470 $0 $0 $0 $0 $0 $0
1993 $145,354 $0 $43,937 $0 $0 $0 $0
1992 $155,771 $0 $55,155 $0 $0 $0 $0
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
Miriam 1996 (B)$98,491 $0 $0 $0 $0 $0 $0
Jarney 1995 $98,491 $0 $0 $0 $0 $0 $0
Exec. V.P. 1994 $98,559 $0 $0 $0 $0 $0 $0
1993 $107,247 $0 $4,991 $0 $0 $0 $0
1992 $113,233 $0 $20,611 $0 $0 $0 $0
=======================================================================================================
</TABLE>
(A) Accrued and unpaid to Charles Lombardo $103,255
(B) Accrued and unpaid to Miriam Jarney $39,576
(C) Consulting Fees
The following table sets forth information with respect to the Principal
Officers concerning the grants of options and Stock Appreciation Rights ("SAR")
during the past fiscal year:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
================================================================================
Name Options/SARs Percent of Total Exercise Expiration
Granted Options/SARs Granted or Base Date
to Employees in Fiscal Price
Year ($/Sh)
================================================================================
Charles J. Lombardo -0- - - -
- --------------------------------------------------------------------------------
Miriam Jarney -0- - - -
================================================================================
- 16 -
<PAGE>
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 Value of
Securities Unexercised
Shares Underlying In-The-Money
Acquired Unexercised Options/SARs
Name on Value Realized Options/SARs at at FY-End ($)
Exercise ($) 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 receives a salary from the Company of $25,000 per year.
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 its Common Stock to Mr. Lombardo in
lieu of the foregoing accrued salary. In January of 1995, the Company issued
1,000,000 shares of common stock to Mr. Lombardo for accrued salary of Multi
Soft.
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 -
<PAGE>
During fiscal 1995 and fiscal 1996, Mr. Lombardo and Ms. Jarney accrued a
portion of their salaries. See financials. The balance due between both officers
as of January 31, 1996 is $746,621 including deferred increases of $636,605.
Item 11. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners -- The persons listed in
the chart below are known to the Company to be the beneficial owners of more
than 5% of the 17,806,898 Shares of the Company's outstanding Common Stock,
$.001 par value, as of March 19, 1996.
- 18 -
<PAGE>
(b) Security Ownership of Management -- The number and percentage of Shares
of Common Stock of the Company owned of record and beneficially by each 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 Percent of
of Beneficial Class (1)
Ownership(1)
================================================================================
Charles J. Lombardo 4,212,414 (1) 23.66%
Chairman of the Board, Chief Executive
Officer, Chief Financial Officer, &
Treasurer
1511 Laurie Lane, Yardley, PA 19067
- --------------------------------------------------------------------------------
Miriam G. Jarney 2,094,100 (2) 11.76%
Executive Vice President, Secretary,
Director
21 Doering Way, Cranford, NJ 07106
- --------------------------------------------------------------------------------
Larry Spatz 0 (3) 0.0%
Director
Suite 332, 401 East Illinois St., Chicago,
IL 60611
- --------------------------------------------------------------------------------
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 6,323,657(4) 35.5%
group (5 persons)
================================================================================
** Less than one percent.
(1) 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").
(2) Includes 19,100 shares owned by Ms. Jarney's husband and 1,000,000 issued
in 1996.
(3) 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.
(4) Based upon 17,806,898 shares outstanding as of April 30, 1996.
- 19 -
<PAGE>
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% (10.75% at January 31, 1996). 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 this
date, Multi Soft is in compliance with the terms of the forbearance agreement
and owes approximately $41,000. During 1996 and 1995, the maximum amount of
borrowings outstanding were $53,729 and $61,415, respectively.
In June 1993, Multi Soft conducted a private placement of Multi Soft common
stock for a total of 268,671 shares at $.03 per share, in connection with the
private placement by Multi Solutions, Inc. ("MSI") of $260,000 in convertible 8%
promissory notes (the "Notes"). MSI used $210,000 of the net proceeds from the
Notes to purchase an additional 700,000 shares of Multi Soft. The principal and
interest due under the Notes, pursuant to the terms of the Notes, have been
converted into restricted shares Multi Soft's common stock at the rate of $.30
per share (936,450 shares in the aggregate). The holders of the Notes and the
268,671 shares have exercised their right to demand registration of these shares
and accordingly, on March 17, 1995 a registration statement on Form SB-2 was
filed with the Securities and Exchange Commission to register these shares and
certain other shares.
In January and March 1994, Multi Soft issued an aggregate of 254,500 shares
at $.03 per share to the individuals who converted their MSI notes into Multi
Soft shares and 254,500 shares to MSI for $.03 per share.
In consideration of MSI incurring the risk of potentially having to pay off
the Notes if the Noteholders had not elected to convert their Notes into Multi
Soft's shares, and in consideration for MSI's purchase of a bulk of restricted
Multi Soft shares with the proceeds of the Note offering at or slightly above
the market value of Multi Soft's freely tradeable shares (i.e., well above the
actual value of such shares given the size of the purchase, the restriction on
transfer and the extreme liquidity problems of Multi Soft at that time), Multi
Soft issued an additional 283,334 shares of its restricted common stock to MSI.
Although there is no written agreement between MSI and Multi Soft granting
MSI preemptive rights with regard to MSI's 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 June 1993, Multi Soft issued 58,334 shares of its common stock to
Charles J. Lombardo as compensation for his personally guaranteeing the
repayment of Multi Soft`s $175,000 loan from the Bank of Mid Jersey.
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.
- 20 -
<PAGE>
Through the end of MSI's fiscal year ending January 31, 1994, MSI owed Mr.
Lombardo $98,946 in accrued salary. In July 1994, MSI authorized the issuance of
549,700 shares of its Common Stock to Mr. Lombardo in lieu of the foregoing
accrued salary. During fiscal 1996, the company issued 1,000,000 shares to each
Charles Lombardo and Miriam Jarney, such transaction being effected to pay
accrued salary of Multi Soft and reducing debts of the company to Multi Soft.
The balance due between both officers as of January 31, 1986 is $746,621
including deferred increases of $636,605.
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").
- 21 -
<PAGE>
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)
16. The required letters from the former accountant (7)
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.
- 22 -
<PAGE>
(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.
(7) Previously filed as an Exhibit to the Company's Form 8-K dated April 25,
1995 as filed with the Commission on or about April 25, 1995, 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, 1996.
- 23 -
<PAGE>
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: May 10, 1996 By: /s/ Charles J. Lombardo
----------------------
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
/s/ Charles J. Lombardo May 10, 1996
- ------------------------------
Charles J. Lombardo Chairman of the Board of
Directors, Chief Executive
Officer, Financial Officer,
and Secretary-Treasurer
/s/ Miriam Jarney May 10, 1996
- ------------------------------
Miriam Jarney Executive Vice President, and
Director
/s/ Larry Spatz May 10, 1996
- ------------------------------
Larry Spatz Director
/s/ James Kaput, PhD. May 10, 1996
- ------------------------------
James Kaput, PhD. Director
/s/ George E. Mansur, Jr. May 10, 1996
- ------------------------------
George E. Mansur, Jr. Director
- 24 -
<PAGE>
Stewart W. Robinson
Certified Public Accountant
450 Seventh Avenue, Suite 1009
New York, NY 10123
Tel: (212) 629-7323
Fax: (212) 629-7052
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
To the Board of Directors
Multi Solutions, Inc.
I have audited the accompanying balance sheets of Multi Solutions, Inc. and
Subsidiary as of January 31, 1996 and 1995 and the related consolidated
statements of operations, changes in stockholders' deficiency and cash flows for
the years then ended. These financial statements are the responsibility of the
Company's management. My responsibility is to express an opinion on these
financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the consolidated financial position of Multi Solutions, Inc.
and Subsidiary as of January 31, 1996 and 1995 and the consolidated 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.
STEWART W. ROBINSON
New York, New York
April 25, 1996
F1
<PAGE>
Multi Solutions, Inc and Subsidiary
CONSOLIDATED BALANCE SHEETS
January 31, 1996 and 1995
1996 1995
---------- ----------
ASSETS
CURRENT ASSETS
Cash $ 89,575 $ 18,342
Accounts receivable( net of allowance of
$37,240 and $32,880 respectively) 100,428 95,791
Prepaid expenses and other current assets 13,532 17,310
---------- ----------
203,535 131,443
FURNITURE AND EQUIPMENT, AT COST
Research and development equipment 259,907 368,382
Office furniture and other 10,053 111,550
---------- ----------
269,960 479,932
Less accumulated depreciation and amortization (266,066) (473,666)
---------- ----------
3,894 6,266
OTHER ASSETS
Capitalized software and development costs 1,980,130 1,613,516
Less accumulated amortization (1,256,153) (886,605)
---------- ----------
723,977 726,911
$ 931,406 $ 864,620
========== ==========
See notes to financial statements
F2
<PAGE>
Multi Solutions, Inc. and Subsidiary
CONSOLIDATED BALANCE SHEETS
January 31,
LIABILITIES AND STOCKHOLDERS' DEFICIENCY 1996 1995
---------- ----------
CURRENT LIABILITIES
Loan payable to bank $ 41,099 $ 53,729
Accrued payroll 30,285 31,190
Payroll and other taxes payable 74,993 78,607
Accounts payable 216,554 303,237
Deferred Compensation due officers/shareholders 636,605 410,847
Accrued Officer Compensation 110,016 152,246
Deferred revenues 309,792 289,391
Loans from officers 22,000
---------- ----------
1,419,344 1,341,247
Deferred Revenues-net of current portion 8,022 200,886
STOCKHOLDERS' DEFICIENCY
Common stock $.001 , par value authorized
40,000,000 shares issued and outstanding:
17,806,898 (1996) 15,806,898 (1995) 17,807 15,807
Additional paid-in capital 8,578,537 8,420,537
Accumulated deficit (9,092,304) (9,113,857)
---------- ----------
(495,960) (677,513)
$ 931,406 $ 864,620
========== ==========
See notes to financial statements
F3
<PAGE>
Multi Solutions, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended January 31, 1996 and 1995
1996 1995
---------- ----------
Revenues
License fees $ 812,069 $ 340,832
Maintenance fees 545,977 542,918
Consulting and other fees 41,134 55,445
---------- ----------
Total revenues 1,399,180 939,195
Operating expenses
Software development and technical support 369,548 281,623
Selling and administrative expenses 1,057,328 1,213,140
---------- ----------
Total expenses 1,426,876 1,494,763
---------- ----------
(Loss) from operations (27,696) (555,568)
Other Income (Expenses)
Interest expense (5,533) (26,655)
Special discount to investors (28,215)
Other income 54,782 45,630
---------- ----------
Total Other Income (Loss) 49,249 (9,240)
---------- ----------
NET INCOME(LOSS) $ 21,553 (564,808)
========== ==========
Weighted average number of shares outstanding 15,974,000 15,486,000
========== ==========
Income (Loss) per share a $ (0.04)
========== ==========
a - less than $.01 per share
See notes to financial statements
F4
<PAGE>
Mutli Solutions, Inc and Subsidiary
STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
Years ended January 31, 1996 and 1995
<TABLE>
<CAPTION>
Common Stock Additional Total
----------------------- paid-in Accumulated stockholders'
Shares Amount capital deficit deficiency
Balance at February 1 1994 ---------- -------- ---------- ----------- ----------
<S> <C> <C> <C> <C> <C>
as originally reported 15,257,198 $ 15,257 $8,322,141 $(8,992,741) $(655,343)
Prior period adjustment 71,932 71,932
---------- -------- ---------- ----------- ----------
Balance at February 1, 1994
as adjusted 15,257,198 15,257 8,322,141 (8,92O,809) (583,411)
Issuance of Stock 549,700 550 98,396 98,946
Addition to minority interest
used to reduce loss absorbed
at 100% 371,760 371,760
Prior period adjustment
Net loss (564,808) (564,808)
---------- -------- ---------- ----------- ----------
Balance at January 31,
1995 15,806,898 15,807 8,420,537 (9,113,857) (677,513)
Issuance of stock 2,000,000 2,000 158,000 160,000
Net Income 21,553 21,553
---------- -------- ---------- ----------- ----------
Balance at January 31,
1996 17,806,898 $17,807 $8,578,537 $(9,092,304) $(495,960)
========== ======= ========== =========== ==========
</TABLE>
See notes to financial statements
F5
<PAGE>
Multi Solutions, Inc. and Subsidiary
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year ended January 31, 1996 and 1995
<TABLE>
<CAPTION>
1996 1995
--------- ---------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ 21,553 $(564,808)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Prior period adjustment -- 71,932
Depreciation and amortization 371,920 308,114
Discount to investors -- 28,215
Changes in assets and liabilities
Accounts receivable (4,637) 157,432
Prepaid expenses and other current assets 3,778 (4,482)
Account payable and accrued expenses (90,297) 46,086
Accrued payroll (905) --
Accrued officer compensation (42,230) --
Deferred officer compensation 225,758 257,162
Accrued payroll and payroll taxes -- (139,249)
Deferred revenues 20,401 (3,444)
Long Term Deferred Revenues (192,863) (42,865)
--------- ---------
Net cash provided by operating activities 312,478 114,093
Cash flows from investing activities
Capital expenditures -- (1,700)
Capitalized software development cost (366,614) (324,310)
--------- ---------
Net cash used in investing activities (366,614) (326,010)
Cash flows from financing activities
net borrowings (repayments) under loan and line of credit ageements (12,630) (7,686)
Loans from Officers (22,000) 22,000
Issuance of Stock 160,000 182,491
--------- ---------
Net cash provided by financing activities 125,370 196,805
--------- ---------
Net increase (decrease) in cash 71,234 (15,112)
Cash at beginning of year 18,342 33,454
--------- ---------
Cash at end of year $ 89,576 $ 18,342
========= =========
</TABLE>
See notes to financial statements
F6
<PAGE>
Multi Solutions, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1996 and 1995
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 subsidiary, Multi Soft, Inc. (Multi Soft).
As of January 31, 1996 and 1995, the company owns 56.8% and 50.3% of Multi
Soft, Inc., respectively.
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 earned net income of $21,547 in 1996 but
incurred losses of $569,808 in 1995. In addition, at January 31, 1996, the
Company's current liabilities exceeded current assets by $1,215,809 and total
liabilities exceeded total assets by $495,960.
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.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
1. Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
the Company and its 56.8% owned subsidiary, Multi Soft, Inc. 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 $2,372 and $9,964 for the years ended January 31,
1996 and 1995 respectively.
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."
F7
<PAGE>
Multi Solutions, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1996 and 1995
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.
The Company 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. The Company'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, 1996 and 1995 are $723,978 and $657,053,
respectively.
The unamortized capitalized software costs relating to the two DOS products
are being amortized over the two year remaining life as of January 31, 1996.
The unamortized costs relating to DOS products at January 31, 1996 and 1995
are $4,878 and $69,791, respectively.
Amortization expense for all products at January 31, 1996 and 1995 was
$369,548 and $298,150, 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.
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.
F8
<PAGE>
Multi Solutions, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1996 and 1995
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
Multi Soft has a demand loan payable to a commercial bank ($41,099 and
$53,729 at January 31, 1996 and 1995 respectively). Borrowings are
collateralized by Multi Soft's accounts receivable and bear interest at the
bank's prime rate plus 2% (10.75% and 9% at January 31, 1996 and 1995
respectively). The loan is currently in default. 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 January 31, 1996, the Company is
in compliance with the terms of the forbearance agreement.
During 1996 and 1995, the maximum amount of borrowings outstanding was
$53,279 and $61,415, respectively, the average borrowing were $47,819 and
$58,000, respectively, and the weighted average interest rates were 11.0% and
9.5%, respectively.
2. Convertible Promissory Notes
In June 1993, the Company conducted a private placement of $260,000 in
convertible promissory notes. In September 1994 the notes were converted into
936,450 shares of Multi Soft's common stock.
NOTE D - INCOME TAXES
As a result of losses incurred in recent years, the Company and its
subsidiary separately have net operating loss carryforwards available to
offset future federal taxable income of approximately $5.5 million and $5.6
million respectively. These losses expire at various dates through 2011.
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
F9
<PAGE>
Multi Solutions, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1996 and 1995
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,
1996 and 1995:
1996 1995
----------- -----------
Capitalized software $(289,000) $(313,000)
Allowance for bad debts 15,000 14,000
Deferred compensation 234,000 149,000
Deferred revenue royalties 127,000 125,000
Loss carryforwards 4,079,000 3,959,000
----------- -----------
Gross deferred tax assets $4,166,000 $3,934,000
Deferred tax assets valuation allowance ($4,166,000) ($3,934,000)
=========== ===========
$ -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 December 1, 1996. There are presently outstanding a
total of 723,793 Class A Warrants, 600 Class B Warrants and 714,012 Class C
Warrants.
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. Private Placement of Securities
F10
<PAGE>
Multi Solutions, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1996 and 1995
In March 1994, Multi Soft issued an additional 104,500 shares to the
Company's investors at $.03 per share and an additional 254,500 shares to the
Company for $.03 per share.
In September 1994, Multi Soft issued 936,450 shares at $.30 per share to
convert the Company's investors' promissory notes, including accrued
interest. Multi Soft also sold 283,334 shares of its restricted common stock
to the Company at $.21 per share.
4. Common Stock Issued to Officers
In July 1994, the Company issued 549,700 shares of common stock (at the rate
of $.18 per share) to the Chairman in lieu of accrued compensation of
$98,946.
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 $4,750 per month. Rental
expense under the lease aggregated approximately $52,000 and $46,000 for the
years ended January 31, 1996 and 1995, 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,
1997 $7,000
1998 7,000
1999 3,000
-------
$17,000
=======
In August 1991, Multi Soft renewed a lease for office space in Edison, New
Jersey, commencing November 1, 1991 for a term of five years at an annual
base rent of $72,600 plus escalations. Multi Soft no longer occupies the
space and settled litigation related to this space in May 1994 for $30,000 to
F11
<PAGE>
Multi Solutions, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1996 and 1995
be paid over 18 months. As of January 31, 1996 Multi Soft is in full
compliance with this settlement. There was no rent expense for the Edison
office charged to operating for the year's ended January 31, 1996 and 1995.
2. Employment Agreements
Multi Soft has employment agreements with two officers which provide minimum
annual compensation of $182,000 through July 1996. 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
As of January 31, 1994, Multi Soft had not remitted payroll taxes, interest,
and penalties to federal and state taxing authorities in the amount of
approximately $58,000. As of January 31, 1996, the federal tax was paid in
full and the tax liens were released. Certain state taxes, interest, and
penalties aggregating approximately $26,000 remain unpaid at January 31,
1996.
4. Litigation
The Company and Multi Soft have been, from time to time, parties to legal
actions arising in the 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.
NOTE G - MAJOR CUSTOMERS
In fiscal 1996 one customer accounted for 42%. In fiscal 1995, one customer
accounted for 33% of total revenue.
NOTE H - SUPPLEMENTAL INFORMATION
Supplemental disclosures of cash flow information for years ended January 31,
1996 and 1995 are as follows:
1996 1995
------ ------
Cash paid during the year for Interest $5,533 $5,720
====== ======
During the year ended January 31, 1995, Multi Soft exchanged 219,797 shares
of the Company's common stock at fair market value for legal and other
services rendered to the Company valued at $53,843 respectively.
NOTE I - SOFTWARE LICENSING AGREEMENT
1. Software Licensing Agreement
F12
<PAGE>
Multi Solutions, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1996 and 1995
On October 8, 1993, the Company entered into a Software Licensing Agreement
(SLA) and other ancillary agreements with IBM Corporation (IBM) providing for
certain exclusive marketing rights for the Company'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 the Company
aggregating $300,000 through June 1995.
The agreements create certain obligations by the Company, including future
maintenance, staffing, response and software source code custody. Future
enhancements may be provided by the Company 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. The net effect will remove $150,000 from deferred
revenues and increase license fee revenues by $150,000.
For the years ended January 31, 1996 and 1995, Muli Soft recognized as income
$192,864 and $56,249 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."
F13
<PAGE>
Multi Solutions, Inc. and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1996 and 1995
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.
NOTE J - SUBSEQUENT EVENTS
On April 29, 1996, the Company formed a subsidiary under the name of
NetCast, Inc. The subsidiary will concentrate on internet technologies.
On May 7, 1996, the Board extended the warrant exercise period to
December 1, 1996.
F14
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.
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