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
OR
[ ] TRANSITION REPORT UNDER TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 1999 Commission File No. 0-15976
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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 (732) 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 [ ]
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: $805,895.
The aggregate market value of the voting stock held by non-affiliates (1) of the
registrant based on the average ask ($.36) and ($.33) bid price of such stock,
as of April 21, 1999 is $4,295,461 based upon $.345 multiplied by the 12,189,741
Shares of Registrant's Common Stock held by non-affiliates.
The number of shares outstanding of each of the registrant's classes of common
stock, as of April 21, 1999, is 18,813,398 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]
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MULTI SOLUTIONS, INC.
Form 10-KSB
Year Ended January 31, 1999
Table of Contents
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Page
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PART I.........................................................................3
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ITEM 1. BUSINESS..............................................................3
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ITEM 2. PROPERTIES............................................................6
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ITEM 3. LEGAL PROCEEDINGS.....................................................6
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS...................6
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PART II........................................................................6
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATEDSTOCKHOLDER MATTERS..6
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
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CONDITION AND RESULTS OF OPERATIONS...................................7
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ITEM 7. FINANCIAL STATEMENTS..................................................9
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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
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AND FINANCIAL DISCLOSURES............................................10
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PART III......................................................................10
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ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
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COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT....................10
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ITEM 10. EXECUTIVE COMPENSATION...............................................11
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ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......13
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ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................13
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PART IV.......................................................................14
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ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.....................................14
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SIGNATURES....................................................................16
FINANCIAL STATEMENTS F1
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PART I
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Item 1. Business.
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General
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During the fiscal year ended January 31, 1999, Multi Solutions, Inc. (the
"Company" or "Multi Solutions") was relatively inactive, its primary activity
being the support of its subsidiary, Multi Soft, Inc. ("Multi Soft"). The
business of Multi Soft is discussed below.
BUSINESS OF MULTI SOFT
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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 52% 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 3x and 95, INFRONT for DOS and a new product COMRAD (ComponenT
ObjeCt Model Rapid Application Development) for 32 bit Windows 95, 98, and NT.
The Technology
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The Multi Soft product line consists of tools for the development of
client-server, front-ending, and Internet based applications using a mainframe
or an Internet server. There are four key elements to the real world
development, delivery and production maintenance of these applications; and they
are all are supported by the Multi Soft product line. These include screen-based
access to mainframe data and processes; message-based access to mainframe and
server 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 Internet and 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 a host is supported by all of Multi
Soft's products.
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").
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").
The Multi Soft Product Line
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The Multi Soft Product line consists of three product sets: the new product
COMRAD (Component Object Model Rapid Application Development) for 32 bit Windows
95, 98, and NT, the WCL product set and the INFRONT product. The WCL product set
runs under Windows 3x and 95 and includes WCL, WCL/ESO and WCL/SDO. The INFRONT
product is an integrated environment that runs under DOS and Windows.
COMRAD is a new component-based development tool released in July 1998. It
takes advantage of Microsoft's COM/DCOM technology and will generate both
components and complete applications, not just applications as currently
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done by WCL. COMRAD will allow you to build client server applications today and
use the same code for your Internet/Intranet applications tomorrow. The
components generated by COMRAD that interface with the mainframe can be used
both by Visual Basic and the your Internet browsers, on individual workstations
or Windows NT servers, depending on the needs of your application. Persistence
and security are achieved through the use of Microsoft's Internet Information
Server (IIS) and Active Server Pages (ASP).
WCL is a toolkit and a set of DLLs (Dynamic Linked Libraries) that work in
conjunction with Windows 3270 emulation products to provide easy integration of
data and processing between PC/LANs (local area networks) and the mainframe.
Because WCL is open, any of the standard Windows development tools such as
PowerBuilder, Visual Basic, and C++, can be used with WCL to create the client
application. It supports the development of GUI front-ends, client-server
applications that use the mainframe as a server and integrity control and
distribution management. The WCL toolkit provides an automated development
environment that includes, among other things, a screen capture mechanism,
screen maintenance and a screen matching facility. In addition, it provides code
generation to remove the complexity and development effort associated with
building GUI front-end applications. Multi Soft also has a 32-bit version of its
WCL product for Windows 95 and Windows NT.
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.
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.
Key Services
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Multi Soft offers training and consulting services designed to help its new
customers get a fast start in client/server development and to help existing
customers with additional resources to facilitate successful production
application roll-outs.
Training Services include basic and advanced product training, as well as
courses such as "Design and Development Methodologies," which covers the major
issues companies need to understand for successfully developing applications
running on distributed platforms.
Consulting Services range from human factors design and project management
to assisting licensees with application development and/or the development of
complete applications.
Technical Support Services include a telephone hotline, fax, e-mail and
Internet support staffed by knowledgeable personnel trained and experienced with
the Multi Soft product line.
Clients
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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
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Edison, Hoechst, 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
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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 and VARs
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To supplement its domestic sales and marketing efforts, Multi Soft uses
international distributors and VARs on a non-exclusive basis.
IBM
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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, the
Company 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 the Company or IBM upon 90 days notice in the
event of a default by the other party. As of November 1996, the contract with
IBM was extended for two more years and IBM is paying the Company monthly
maintenance and royalties. As of January 31, 1999 the contract with IBM was
extended for one year and IBM is paying Multi Soft monthly maintenance.
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".
Employees
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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 eight full time employees, including two
officers, one support personnel, four technical and engineering personnel plus
several independent consultants, which work for the company on an as needed
basis.
Competition
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Multi Soft operates 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 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 advance over other
products being marketed.
NetCast, Inc.
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NetCast, Inc. is a subsidiary company of Multi Solutions 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. Multi Solutions currently owns 75% of
NetCast. Multi Soft provides services and office space to NetCast at cost for
which it has billed approximately $234,592 through January 31, 1999. During the
fiscal year ending January 31, 1999 Charles J. Lombardo devoted a substantial
amount of his time to NetCast activities. Multi Soft charged NetCast for this
time. Multi Solutions has guaranteed NetCast's debt to Multi Soft. The Board of
Directors consists of two officers, Charles
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Lombardo and Miriam Jarney. No assurance can be made that NetCast will obtain
the funding necessary to complete its software and bring it to the marketplace.
Item 2. Properties
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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 $5,200 per
year. Multi Soft is responsible for all utilities.
Item 3. Legal Proceedings
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The Company is not presently a party to any material litigation. However,
The Company and Multi Soft have been, from time to time, parties to legal
actions arising in the normal course of their business. In the opinion of
management, the disposition of these actions will not have a material effect on
the financial position or results of operations of The Company taken as a whole.
In May 1997, a lawsuit was commenced against NetCast in the Superior Court of
New Jersey by former consultants for approximately $113,000 for services
rendered. The Company has accrued $24,000 for services rendered prior to
commencement of the action. The Company contests the claim and contends that no
services were rendered nor product delivered. Also, the Company intends to
vigorously defend the lawsuit and has made counterclaims.
Tax Liens
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Certain federal, state taxes, interest, and penalties aggregating
approximately $17,000 remain unpaid at January 31, 1999.
Item 4. Submission of Matters to a Vote of Security Holders
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No matters were submitted to a vote of security holders in the last quarter
of the Company's fiscal year ended January 31, 1999.
PART II
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Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
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(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 have not traded and hence not
priced.
Bid Prices
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Period - Fiscal Year 1998 High Low
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First Quarter ending April 30, 1997 .245 .10
Second Quarter ending July 31, 1997 .35 .10
Third Quarter ending October 31, 1997 .35 .13
Fourth Quarter ending January 31, 1998 .13 .055
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Period - Fiscal Year 1999 High Low
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First Quarter ending April 30, 1998 .33 .04
Second Quarter ending July 31, 1998 .32 .11
Third Quarter ending October 31, 1998 .11 .07
Fourth Quarter ending January 31, 1999 .32 .07
(b) Holders -- There were approximately 843 holders of record of the
Company's Common Stock, 189 holders of record of the Class A Warrants, 1 holder
of record of the Class B Warrants and 54 holders of record of the Class C
Warrants as of March 9, 1999, 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.
Issuances of Common Stock
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NAME DATE NUMBER
OF SECURITIES ISSUED
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MIRIAM JARNEY (A) 3/15/98 150,000
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CHARLES J. LOMBARDO (A) 3/15/98 150,000
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JOSEPH LOMBARDO (A) 3/15/98 25,000
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HES GIFT (A) 3/15/98 100,000
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JEANETTE RUSSEL (A) 3/15/98 4,000
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J.B. LOWY (A) 3/15/98 12,500
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LORETTA MESSINA (B) 3/15/98 15,000
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LINDA DORRIAN (B) 3/15/98 20,000
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LORRAINE HARTLEY (B) 3/15/98 10,000
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HARRY WINGARD (B) 3/15/98 10,000
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HOWARD MENDELSON (B) 3/15/98 25,000
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ELAIN BINE (B) 3/15/98 10,000
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JOSEPH CAMISCIONI (B) 3/15/98 20,000
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SHARON JONES (B) 3/15/98 10,000
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PATRICIA MCMAHON (B) 3/15/98 20,000
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(A) For services rendered
(B) Grant under the Companies Stock Grant Program
Item 6. Management's Discussion and Analysis of Financial Condition and
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Results of Operations
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Results of Operations
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Fiscal Year Ended January 31, 1999 Compared to Fiscal Year Ended January 31,
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1998
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Revenues for the fiscal year ended January 31, 1999 were $805,895 as
compared to $901,450 in fiscal year 1998, a decrease of $95,555 (10.6%). This
decrease is primarily due to a decrease in maintenance fees from $645,265 to
$524,948 much of which come from the Multi Soft's largest customers. The primary
reason for this decrease is that there were no royalty advances paid to Multi
Soft during this fiscal year.
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In fiscal 1999 and 1998, Multi Soft's two principal sources of revenues
were license fees and maintenance fees which represented approximately 99.2%
($798,948) and 98.6% ($888,411) of revenues, respectively.
Management believes that the decrease in maintenance fees during the fiscal
year ended January 31, 1999 is due to the non-renewal of maintenance contracts
by customers.
Operating expenses decreased 9.1% from fiscal 1998 ($895,749) to fiscal
1999 ($813,462) primarily as a result of lower selling and administrative costs
offset by an increase in software development costs. The decrease in selling and
administrative costs is principally due to lower levels of salaries and related
costs.
Other income (expenses) changed from $(804) in fiscal 1998 to $56,873 in
fiscal 1999.
As a result of the foregoing, Multi Solution's earned net income in fiscal 1999
of $49,306 compared to its net income in 1998 of $4,897.
Major Customers
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In fiscal 1999, IBM accounted for 25% of total revenues. In fiscal 1998,
IBM accounted for 29% of total revenues.
Liquidity and Capital Resources
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At January 31, 1999, the Company had a working capital deficiency of
($444,841) and has experienced cash flow problems.
Management of Multi Soft continues to take various steps to correct this
situation. Overhead costs have been cut drastically as a result of staff
reductions and curtailment of all outside marketing and advertising costs. In
addition, senior staff salaries were reduced and executive officers' salaries
were partly deferred. Secondly, Multi Soft broadened its product base into the
Windows 95 and Windows/NT environment and has made its Windows based products
easier to learn and use.
It is Multi Soft's intent to remain a technology provider and search out
multiple distribution channels, with increasing emphasis on the use of the
Internet for marketing, 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 the Company 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:
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Descriptions January 31, 1999 January 31, 1998
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Working capital (deficiency) ($444,841) ($483,700)
Current ratios .30:1 .18:1
Dividend Policy
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The Company has not declared or paid any dividends on its common stock
since its inception and does not anticipate the declaration or payment of cash
dividends in the foreseeable future. The Company intends to retain earnings, if
any, to finance the development and expansion of its business. Future dividend
policy will be subject to the discretion of the Board of Directors and will be
contingent upon future earnings, if any, the Company's financial condition,
capital requirements, general business conditions and other factors. Therefore,
there can be no assurance that dividends of any kind will ever be paid.
Year 2000
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Many computer systems may experience problems handling dates beyond the
year 1999. The Company's products are not directly impacted by this problem.
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In particular, Year 2000 issues are transparent to WCL. WCL simply
transports data between the 3270/5250 presentation space and the client
application. WCL does no formatting of any data, including dates. The client
development tools, such as VB, PB, and VC++ handles this. Therefore, these
development tools, not WCL, must address Year 2000 issues.
In addition, The Company's INFRONT products have built in support for Year
2000. Any date functions in use within an INFRONT application that use 4
positions for the year will automatically handle Year 2000 with no changes.
For date functions that use 2 positions for the year, the SETUPSL command
can be used to handle the Year 2000.
Effect of Inflation
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Management believes that inflation has not had a material effect on its
operations for the periods presented.
CAUTIONARY STATEMENT
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This Form 10-KSB contains certain forward-looking statements regarding,
among other things, the anticipated financial and operating results of the
Company and it's subsidiaries. For this purpose, forward-looking statements are
any statements contained herein that are not statements of historical fact and
include, but are not limited to, those preceded by or that include the words,
"believes," " expects,", or similar expressions. In connection with the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995, the
Company is including this cautionary statement identifying important factors
that could cause the Company's or its subsidiaries actual results to differ
materially from those projected in forward looking statements made by, or on
behalf of, the Company. These factors, many of which are beyond the control of
the Company and its subsidiaries, include Multi Soft's ability to, (I) continue
as a going concern, (ii) continue to receive royalties from its existing
licensing and consulting arrangements, (iii) develop additional marketable
software and technology , (iv) compete with larger, better capitalized
competitors, and (v) reverse ongoing liquidity and cash flow problems.
Item 7. Financial Statements
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The following financial statements are attached to 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, 1999
INDEX
Page #
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Report of Independent Certified Public Accountant F1
Consolidated Balance Sheets - January 31, 1999 and 1998 F2, F3
Consolidated Statements of Operations for Each of the
Years in the Period Ended January 31, 1999 F4
Consolidated Statements of Changes in Stockholders' Deficiency
for Each of the Two Years in the Period Ended January 31, 1999 F5
Consolidated Statements of Cash Flows for Each of the Two
Years in the Period Ended January 31, 1999 F6
Notes to Financial Statements F7-F14
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Schedules
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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
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Financial Disclosures.
----------------------
None
PART III
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Item 9. Directors, Executive Officers, Promoters and Control Persons;
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Compliance with Section 16(a) of the Exchange Act
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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, Ph.D. 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 56, has been the Company's 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 58, has been a Director, Executive Vice President and
Secretary of the Company 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. In February 1982, Ms. Jarney started her own company, Dedicated
Systems, Inc., for the purpose of packaging computer software for the
microprocessor market, which company is inactive.
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LARRY SPATZ, age 56, 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 69, has been a Director of the Company since March
1982. Since March, 1984, Mr. Mansur has also been Chairman of ALG Corp. and
Chairman of Auto Loan Guarantee Company, as well as President of National
Benefit Services Corp. and Executive Vice President of Benefit Services Group,
Ltd. Since January 1981, Mr. Mansur has been an officer of Petro-Art Ltd., an
inactive publicly owned New Jersey corporation. From 1971 to 1976, he was
President of Benefit Communications, Corp. From 1977 to 1978, he was marketing
director of Commercial Credit Corp., and in 1979 and 1980, he was an officer of
Coronet Graphics, Ltd. and Agri Parogram, Ltd. Mr. Mansur is a Charter Member of
the International Association of Financial Planners.
DR. JAMES J. KAPUT, age 57, a Director of the Company since July 14, 1989,
has been a Professor of Mathematics at Southern Massachusetts University since
1968. Since 1986, he has also been a Research Associate at Harvard University.
Dr. Kaput received a B.S. Degree in Mathematics from Worcester Polytechnic
Institute in 1964 and a Ph.D. in Mathematics from Clark University in 1968.
Section 16(a) Beneficial Ownership Reporting Compliance
- -------------------------------------------------------
To the Company's knowledge, based solely on a review of such materials as
are required by the Securities and Exchange Commission, no officer, director or
beneficial holder of more than ten percent of the Company's issued and
outstanding shares of Common Stock failed to timely file with the Securities and
Exchange Commission any form or report required to be so filed pursuant to
Section 16(a) of the Securities Exchange Act of 1934 during the fiscal year
ended January 31, 1999.
Item 10. Executive Compensation.
-----------------------
The following table shows all the cash compensation paid or to be paid by
the Company and Multi Soft, as well as certain other compensation paid or
accrued, during the fiscal years indicated, to the Chief Executive Officer and
Executive Vice President (collectively, "Principal Officers") for such period in
all capacities in which they served. No other Executive Officer received total
annual salary and bonus in excess of $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
ANNUAL COMPENSATION LONG TERM COMPENSATION
- ---------------------------------------------------------------- ---------------------------------------------------------
AWARDS PAYOUTS
- ---------------------------------------------------------------- ----------------------------- ---------------------------
NAME & FISCAL SALARY ($) BONUS OTHER ANNUAL RESTRICTED OPTIONS LTIP ALL OTHER
PRINCIPLE YEAR ($) COMPENSATION STOCK SARS PAYOUTS COMPENSA-
POSITION ($) AWARD ($) ($) TION ($)
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CHARLES J. 1999 (A) $12,500 $0 (C) $34,550 $0 $0 $0 $0
LOMBARDO CEO 1998 (A) $ 60,000 $0 (D) $40,493 $0 $0 $0 $0
1997 $ 80,000 $0 $20,000 $0 $0 $0 $0
- --------------------------------------------------------------------------------------------------------------------------
MIRIAM JARNEY 1999 (B) $25,00 $0 (E) $16,000 $0 $0 $0 $0
EXEC. V.P. 1998 (B) $ 60,000 $0 $0 $0 $0 $0 $0
1997 $ 80,000 $0 $0 $0 $0 $0 $0
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
(A) Accrued and unpaid to Charles Lombardo $0 for 1999 and $39,167 for prior
year.
(B) Accrued and unpaid to Miriam Jarney $0 for 1999 and $10,000 for prior year.
(C) Consisting of $19,950 in consulting fees and the Companies common stock
valued at $14,600
-11-
<PAGE>
(D) Consulting fees
(E) The Companies common stock valued at $16,000
The following table sets forth information with respect to the Principal
Officers concerning the grants of options and Stock Appreciation Rights ("SAR")
during the past fiscal year:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
NAME OPTIONS/SARS PERCENT OF TOTAL EXERCISE OR BASE EXPIRATION DATE
GRANTED OPTIONS/SARS GRANTED PRICE ($/SH)
YEAR TO EMPLOYEES IN FISCAL
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHARLES J. LOMBARDO -0- - - -
- -----------------------------------------------------------------------------------------------------------
MIRIAM JARNEY -0- - - -
- -----------------------------------------------------------------------------------------------------------
</TABLE>
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
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES VALUE UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS/
ACQUIRED ON REALIZED ($) OPTIONS/SARS AT SARS AT
NAME EXERCISE (#) FY-END (#) FY-END ($)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CHARLES J. LOMBARDO -0- -0- -0- -0-
- -------------------------------------------------------------------------------------------------------------
MIRIAM JARNEY -0- -0- -0- -0-
- -------------------------------------------------------------------------------------------------------------
</TABLE>
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 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 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.
Under Mr. Lombardo's contract he may assign any part of his salary to a third
party as a consulting fee.
Mr. Lombardo also is entitled to a salary from the Company of $25,000 per
year, which he 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 the Company, which 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
-12-
<PAGE>
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.
In January of 1996, the Company issued 1,000,000 shares of common stock to
Mrs. Jarney in lieu of accrued salary of Multi Soft.
During fiscal 1997 and fiscal 1998, Mr. Lombardo and Ms. Jarney accrued a
portion of their salaries. The balance due between both officers as of January
31, 1999 is $784,662 including deferred increases of $631,605.
Item 11. Security Ownership of Certain Beneficial Owners and Management
--------------------------------------------------------------
Security Ownership of Management -- The number and percentage of Shares of
Common Stock of the Company owned of record and beneficially by each owner of 5%
or more of the common stock, officer and director of the Company and by all
officers and directors of the Company as a group are set forth on the chart
below.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
NAME AND ADDRESS OF BENEFICIAL OWNER AMOUNT AND NATURE OF PERCENT OF CLASS
BENEFICIAL
OWNERSHIP
- ----------------------------------------------------------------------------------------------------
<S> <C> <C>
CHARLES J. LOMBARDO 4,362,414 (2) 23.1%
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER,
CHIEF FINANCIAL OFFICER, & TREASURER
1511 LAURIE LANE, YARDLEY, PA 19067
- ----------------------------------------------------------------------------------------------------
MIRIAM G. JARNEY 2,244,100 (3) 11.9%
EXECUTIVE VICE PRESIDENT, SECRETARY, DIRECTOR
21 DOERING WAY, CRANFORD, NJ 07106
- ----------------------------------------------------------------------------------------------------
LARRY SPATZ 0 (4) 0.0%
DIRECTOR
3175 COMMERCIAL AVE., SUITE 222
NORTHBROOK, IL 60062
- ----------------------------------------------------------------------------------------------------
JAMES J. KAPUT, PHD. 10,000 **
DIRECTOR
473 CHASE ROAD, N. DARTMOUTH, MA 02747
- ----------------------------------------------------------------------------------------------------
GEORGE E. MANSUR, JR. 7,143 **
DIRECTOR
1413 STATE RD., PHOENIXVILLE, PA 19460
- ----------------------------------------------------------------------------------------------------
ALL EXECUTIVE OFFICERS AND DIRECTORS
AS A GROUP (5 PERSONS) 6,623,657 (4) 35.2%
- ----------------------------------------------------------------------------------------------------
</TABLE>
** Less than one percent.
(1) Based upon 18,813,398 shares of common stock outstanding on April 2, 1999
(2) Includes shares held by Mr. Lombardo's wife and shares owned jointly with
his wife. Also includes 1,000,000 shares issued to Mr. Lombardo in 1996
(See "Item 10. Executive Compensation").
(3) Includes 19,100 shares owned by Ms. Jarney's husband.
(4) Excludes shares owned beneficially by a family trust of which Mr. Spatz'
wife is one of the beneficiaries. Mr. Spatz has confirmed to the Company
that neither he nor his wife has any voting or dispositive power with
regard to the shares owned by the trust.
Item 12. Certain Relationships and Related Transactions
----------------------------------------------
As of January 31, 1999, 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% (9% at January 31, 1999 The loan
agreement provides for a monthly payments of $1,500 of principal and interest
and the personal guarantee of the Company's Chairman. As of March 31, 1999, the
loan was paid off and Multi Soft is no longer indebted to this bank. During 1999
and 1998, the maximum amount of borrowings outstanding were $16,338 and $25,497,
respectively.
-13-
<PAGE>
Although there is no written agreement between Multi Solutions, and Multi
Soft granting Multi Solutions preemptive rights with regard to Multi Solutions
majority ownership of Multi Soft common stock, in practice, MSI has and plans to
continue to acquire sufficient shares of Multi Soft's common stock to assure its
majority ownership in Multi Soft.
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").
PART IV
-------
Item 13. Exhibits, Lists and Reports on Form 8-K.
----------------------------------------
Exhibits
- --------
3.a Certificate of Incorporation of the Company (1)
3.b By-Laws of the Company (1)
4.a Specimen Common Stock of the Company (1)
4.b Class A Warrant (1)
4.c Class B Warrant (1)
4.d Class C Warrant (4)
10.a Company Employment Agreement with Charles J. Lombardo (5)*
10.b Multi Soft Employment Agreement with Charles J. Lombardo (5)*
10.c Multi Soft Employment Agreement with Miriam G. Jarney(5)*
10.d Licensing Agreement with Widow, Inc. (6)
10.e Agreements with IBM (2)
10.f Copy of MSI's Non-Qualified Stock Option Plan, Stock Grant Program and
Employee Incentive Stock Option Plan (3)
10.g Amendments to MSI's Non-Qualified Stock Option and Stock Grant Program
(4)
21. List of Subsidiaries (7)
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.
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 Registration Statement on
Form SB-2 for fiscal year ending January 31, 1999 as filed with the
commision on April 30, 1999 (file No. 0-12162) and incorporated herein by
reference.
-14-
<PAGE>
Reports of Form 8-K
- -------------------
No reports on Form 8-K were filed during the last quarter of the fiscal
year ended January 31, 1999.
-15-
<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 15, 1999 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 15, 1999
- ----------------------------
Charles J. Lombardo Chairman of the Board of Directors,
Chief Executive Officer, Chief
Financial Officer and Secretary-
Treasurer
/S/ Miriam Jarney May 15, 1999
- ----------------------------
Miriam Jarney Executive Vice President, and Director
/S/ Larry Spatz May 15, 1999
- ----------------------------
Larry Spatz Director
/S/ James Kaput, PhD. May 15, 1999
- ----------------------------
James Kaput, PhD. Director
/S/ George E. Mansur, Jr. May 15, 1999
- ----------------------------
George E. Mansur, Jr. Director
-16-
<PAGE>
STEWART W. ROBINSON
CERTIFIED PUBLIC ACCOUNTANT
67 WALL STREET - 5TH FLOOR
NEW YORK, NY 10005
TEL: 212-843-4100
FAX: 212-785-9414
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
--------------------------------------------------
To the Board of Directors
MULTI SOLUTIONS, INC.
I have audited the accompanying balance sheets of MULTI SOLUTIONS, INC. AND
SUBSIDIARIES as of January 31, 1999 and 1998 and the related statements of
operations, changes in stockholders' equity and cash flows for the years then
ended. These financial statements are the responsibility of the Company's
management. My responsibility is to express an opinion on these financial
statements based on our 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 financial position of MULTI SOLUTIONS, INC. AND
SUBSIDIARIES as of January 31, 1999 and 1998 and the results of its operations
and its cash flows for the years then ended, in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. As discussed in Note A to the
financial statements, the Company has suffered recurring losses from operations
and has a working capital deficiency, raising substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note A. The financial statements do not include
any adjustments relating to the recoverability and classification of asset
carrying amounts or the amount and classification of liabilities that might
result should the Company be unable to continue as a going concern.
STEWART W. ROBINSON
New York, New York
May 24, 1999
F1
<PAGE>
MULTI SOLUTIONS,INC AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 31 ,1999 and 1998
1999 1998
----------- -----------
ASSETS
CURRENT ASSETS
Cash $ 18,420 $ 29,524
Accounts Receivable (net of allowance
of $43,783 and $29,086 respectively) 132,316 58,635
Prepaid expenses and other current assets 13,385 20,799
----------- -----------
164,121 108,958
FURNITURE AND EQUIPMENT
Research and Development Equipment & Software 63,526 63,526
Office furniture and other equipment 20,474 20,474
----------- -----------
84,000 84,000
Less: Accumulated Depreciation (16,780) (10,952)
----------- -----------
67,220 73,048
Organizational costs 2,415 2,415
Less: Accumulated Amorization (968) (484)
----------- -----------
1,447 1,931
OTHER ASSETS
Capitalized software development costs 1,607,505 1,716,121
Less accumulated amortization (809,915) (939,942)
----------- -----------
797,590 776,179
Intangibles 200 200
----------- -----------
$ 1,030,578 $ 960,316
=========== ===========
F2
<PAGE>
MULTI SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
January 31, 1999 and 1998
LIABILITIES AND STOCKHOLDERS' 1999 1998
----------- -----------
DEFICIENCY
CURRENT LIABILITIES
Loan payable to bank $ 796 $ 16,338
Note Payable 6,565 11,339
Accrued payroll -- 20,080
Payroll and other taxes payable 19,480 32,755
Accounts Payable 196,416 167,269
Accrued officer compensation 198,057 198,057
Deferred Revenues 187,648 191,820
----------- -----------
608,962 637,658
Deferred compensation due officer /shareholders 586,605 586,605
STOCKHOLDERS' DEFICIENCY
Common stock, authorized 40,000,000 shares
$.001 par value, issued and outstanding 18,814 18,267
18,813,398 (1999) and 18,266,898 (1998)
Additional paid-in capital, 8,661,197 8,643,517
Accumulated deficit (8,845,000) (8,925,731)
----------- -----------
(164,989) (263,947)
$ 1,030,578 $ 960,316
=========== ===========
F3
<PAGE>
MULTI SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
Years Ended January 31, 1999 and 1998
1999 1998
------------ ------------
REVENUES
License fees $ 273,760 $ 243,146
Maintenance fees 524,948 645,265
Consulting and Other fees 7,187 13,039
------------ ------------
Total revenues 805,895 901,450
EXPENSES
Software development and technical support 239,794 258,584
Selling and administrative 573,668 637,165
------------ ------------
Total expenses 813,462 895,749
------------ ------------
Income (loss) from operations (7,567) 5,701
OTHER INCOME (EXPENSE)
Other Revenues 66,391 --
Interest Expense (9,518) (804)
------------ ------------
Total other income 56,873 (804)
Net Income $ 49,306 $ 4,897
============ ============
Weighted average shares outstanding 18,749,543 18,121,062
============ ============
Income per share a a
============ ============
(a) less then $.01 per share
F4
<PAGE>
<TABLE>
<CAPTION>
MULTI SOLUTIONS,INC AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICIENCY
Years ended January 31, 1999 and 1998 Total Total
Common Stock paid in Accumulated Deferred stockholders
Shares Amount capital deficit Compensation deficiency
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 31, 1997 18,016,898 $ 18,017 $ 8,595,101 $ (8,939,455) $ (2,667) $ (329,004)
Issuance of resticted common stock 250,000 250 49,750 50,000
Addition to Minority Interest used to
reduce loss absorbed at %100 8,827 8,827
Addition of Minority Interest --
Deferred Compensation 1,333 1,333
Net Income 4,897 4,897
------------ ------------ ------------ ------------ ------------ ------------
Balance at January 31, 1998 18,266,898 $ 18,267 $ 8,644,851 $ (8,925,731) $ (1,334) $ (263,947)
Issuance of resticted common stock 506,500 507 34,949 (35,456) --
Issuance of common stock 40,000 40 1,960 2,000
Addition to Minority Interest used to 31,426 31,426
reduce loss absorbed at %100
Amortization of stock grants 16,226 16,226
Net Income 49,305 49,305
------------ ------------ ------------ ------------ ------------ ------------
Balance at January 31, 1999 18,813,398 $ 18,814 $ 8,681,760 $ (8,845,000) $ (20,564) $ (164,990)
============ ============ ============ ============ ============ ============
</TABLE>
F5
<PAGE>
MULTI SOLUTIONS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended January 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
--------- ---------
Cash flows from operating activities
<S> <C> <C>
Net Income $ 49,306 $ 4,897
Adjustments to reconcile net income (loss) to net cash
provided by operating activities
Depreciation and amortization 246,104 290,999
Common stock issued to Solutions
Changes in assets and liabilities
Accounts receivable (73,681) (40,064)
Prepaid expenses and other current assets 7,416 (7,267)
Accrued payroll (20,080) 20,080
Payroll and other taxes payable (13,275) (5,315)
Note Payable (4,774) (4,165)
Accounts payable and accrued expenses 29,147 2,369
Accrued officer compensation -- 49,707
Deferred revenues (4,172) 23,409
--------- ---------
Net cash provided by operating activities 215,991 334,650
Cash flows from investing activities
Capital expenditures -- (50,915)
Capitalized software development costs (261,205) (318,786)
--------- ---------
Net cash used in investing activities (261,205) (369,701)
Cash flows from financing activities
Net repayments under loan and line of credit ageements (15,542) (9,159)
Losses in excess of investment in subsidiaries 31,426 8,826
Amortization of stock grants 16,226 1,333
Issuance of capital stock 2,000 50,000
--------- ---------
Net cash provided by financing activities 34,110 51,000
--------- ---------
NET INCREASE (DECREASE) IN CASH (11,104) 15,949
Cash at beginning of year 29,524 13,575
--------- ---------
Cash at end of year $ 18,420 $ 29,524
========= =========
</TABLE>
F6
<PAGE>
Multi Solutions, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1999 and 1998
NOTE A - DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION
Multi Solutions, Inc. the "Company" was incorporated under the laws of the
State of New Jersey on July 26, 1982. The Company is presently a holding
company for its ownership of its subsidiaries, Multi Soft, Inc. (Multi
Soft) and NetCast, Inc. ("NetCast"). As of January 31, 1999, the Company
owns 52% of "Multi Soft" and 75% of NetCast.
The Company's consolidated financial statements have been presented on a
going concern basis which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. The liquidity
of the Company has been adversely affected in recent years by significant
losses from operations. The Company had consolidated net income of of
$49,306 in 1999 and $4,897 in 1998. In addition, at January 31, 1999, the
Company's current liabilities exceeded current assets by $444,841 and total
liabilities exceeded total assets by $164,989.
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 subsidiaries, Multi Soft and NetCast. All significant
intercompany balances and transactions have been eliminated in
consolidation. None of Multi Soft's net income was allocated to minority
shareholders because the Company absorbed the minority interest of
accumulated losses allocated up to January 31, 1995.
2. Furniture and Equipment
-----------------------
Furniture and equipment are stated at cost. Depreciation is provided on the
straight-line method over the estimated useful lives of the assets which
range from three to seven years.
Depreciation expense was $6,308 for each of the years ended January 31,
1999 and 1998 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."
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
F7
<PAGE>
Multi Solutions, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1999 and 1998
and anticipated gross revenues for that product or (b) the straight-line
method over the remaining useful life of the product, whichever is greater.
Multi Soft is amortizing, over a sixty month period, the capitalized
software costs for its Windows-based products. The period is based on sales
forecasts for the seven year agreement between Multi Soft and IBM which
began in October 1993. Multi Soft's Windows products are compatible with
Windows 95 and further modifications are continually made, specifically for
32 bit environments (Windows 95 and Windows NT). Unamortized costs relating
to Windows products at January 31, 1999 and 1998 are $797,590 and $776,179,
respectively.
Amortization expense for all products at January 31, 1999 and 1998 was
$239,794 and $258,584 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.
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
NOTE C - NOTES PAYABLE
1. Demand Loan - Bank
------------------
Multi Soft has a demand loan payable to a commercial bank ($796 and $16,338
at January 31, 1999 and 1998 respectively). Borrowings are collateralized
by the Multi Soft's accounts receivable and bear interest at the bank's
prime rate plus 2% (9.75% at January 31, 1999) As of March 31, 1999 Multi
Soft is in compliance with the terms of the agreement and the balance has
been paid in full.
F8
<PAGE>
Multi Solutions, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1999 and 1998
During 1999 and 1998, the maximum amount of borrowings outstanding was
$16,338 and $25,497 respectively, the average borrowings were $8,567 and
$20,918, respectively, and the weighted average interest rates were 10.1%.
2. Note Payable
------------
In June 1996, $18,700 due to a vendor was converted to a note at the rate
of $597 per month for 36 months with interest at 9%.
NOTE D - INCOME TAXES
As a result of losses incurred in recent years, the Company and its
subsidiaries separately have net operating loss carryforwards available to
offset future federal taxable income of approximately $5.5 million. These
losses expire at various dates through 2012.
The Company adopted, effective February 1, 1993, SFAS No. 109, "Accounting
for Income Taxes." Under the liability method specified by SFAS No. 109,
deferred tax assets and liabilities are determined based on the difference
between the financial statement and tax basis of assets and liabilities are
determined based on the difference between the financial statement and tax
basis of assets and liabilities as measured by the enacted tax rates which
will be in effect when these differences reverse. Deferred tax expense is
the result of changes in deferred tax assets and liabilities. The principal
types of differences between assets and liabilities for financial statement
and tax return purposes are capitalized software development costs,
deferred compensation, deferred revenues and allowance for uncollectible
accounts.
NOTE E - STOCKHOLDERS' DEFICIENCY
1. Warrants
--------
The expiration dates of the Company's Class A, Class B and Class C Warrants
have been extended to June 1, 1999. 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. Common Stock Issued to Officers
-------------------------------
In January 1996, Multi Soft issued 1,500,000 shares of its common stock to
the Company. The transaction was valued at $.22 per share ($330,000) for
which Multi Solutions was to issue a note.
In connection with this transaction, Multi Soft paid for the acquisition of
1,000,000 each of the Company's common shares (valued at $0.08 per share)
to the chairman and vice president by allowing the indebtedness of the
Company to Multi Soft to be reduced by $160,000 which thereby reduced the
debt of Multi Soft to the two officers by the same amount.
After completion of this series of transactions, the net debt due to Multi
Soft in connection with the common stock sale was reduced to $170,000.
F9
<PAGE>
Multi Solutions, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1999 and 1998
In December 1998, Multi Soft issued 500,000 shares of common stock to the
company. The transaction was valued at $.05 per share ($25,000). The effect
of this transaction was to reduce indebtedness owed to the company, from
approximately $33,000 to $7,000.
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 $5,200 per month. Rental
expense under the lease aggregated approximately $62,400 and $59,450 for
the years ended January 31, 1999 and 1998, respectively.
Future minimum lease payments under the noncancellable equipment operating
lease are as follows:
In November 1997 the Multi Soft entered into a 60 month operating lease for
a laser copier with monthly payments of $365 plus tax and copy charges
through October 2003.
Year Ending January 31 Laser Color Total
Copier Copier
---------------------- -------- ------- -------
2000 $ 4,380 $ 6,000 $10,380
2001 4,380 6,000 10,380
2002 4,380 3,000 7,380
2003 3,285 - 3,285
-------- ------- -------
$16,425 $15,000 $31,425
2. 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 relinquished unpaid salaries for the years ending January
31, 1999 and 1998.
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 as of fiscal 1997
3. Payroll Taxes
-------------
Certain Federal and state taxes, interest, and penalties aggregating
approximately $17,000 remain unpaid at January 31, 1999.
4. Litigation
----------
The Company and Multi Soft have been, from time to time, parties to legal
actions arising in the normal course of their business. In the opinion of
management, the disposition of these actions will not have a material
effect on the financial position or results of operations of the Company
taken as a whole.
In May 1997, a lawsuit was commenced against NetCast by former consultants
for approximately $113,000. The Company has accrued $24,000 prior to
commencement of the action. The Company intends to vigorously defend the
lawsuit and has made counterclaims.
F10
<PAGE>
Multi Solutions, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
January 31, 1999 and 1998
NOTE G - MAJOR CUSTOMERS
In fiscal 1999 one customer accounted for 25%. In fiscal 1998, one customer
accounted for 29% of total revenue.
NOTE H - SUPPLEMENTAL INFORMATION
Supplemental disclosures of cash flow information for years ended January
31, 1999 and 1998 are as follows:
1999 1998
---- ----
Cash paid during the year for Interest $9,518 $3,504
------ ------
NOTE I - SOFTWARE LICENSING AGREEMENT
Effective June 1, 1995 Multi Soft and IBM amended their Software License
Agreement number: STL93199 and its related worldwide marketing agreements,
such that, $150,000 dollars of the $300,000 advance amount deferred as of
January 31, 1994 shall, as of June 1, 1995 no longer be subject to offset
against royalties accrued.
For the years ended January 31, 1999 and 1998, the Company recognized as
income $0 and $8,022 of $300,000 advance respectively. As of the date of
this filing, the entire $300,000 has been amortized to revenue.
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". During fiscal 1997 the company has been receiving maintenance for
the above contract. In October 1996 agreement # R94564 was amended to
provide $15,000 in monthly payments to the company through October 1998. As
of January 31, 1999, the contract with IBM was extended for one year and
IBM is paying monthly maintenance of $7,000.
NOTE J - RELATED PARTY TRANSACTIONS
Multi Soft, from time to time, pays incidental expenses of the Company and
allocates its share of certain expenses. These items are credited to
intercompany payable and no payments have been made during the current
fiscal year. The balance due to Multi Soft at January 31, 1999 and 1998 was
$448,039 and $422,239, respectively.
Multi Soft provides certain services and office space to NetCast. The
balance due from NetCast, for such services, at January 31, 1999 was
$234,592. The Company has guaranteed this debt to Multi Soft.
NOTE K - NETCAST
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 has developed certain software products and is attempting
to raise private funding for its operations. However, no assurance can be
made that it will obtain the funding necessary to bring its software to the
marketplace.
F11
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<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-END> JAN-31-1999
<CASH> 18,420
<SECURITIES> 0
<RECEIVABLES> 145,701
<ALLOWANCES> (43,783)
<INVENTORY> 0
<CURRENT-ASSETS> 164,121
<PP&E> 84,000
<DEPRECIATION> (16,780)
<TOTAL-ASSETS> 1,030,578
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<BONDS> 0
<COMMON> 18,814
0
0
<OTHER-SE> 164,989
<TOTAL-LIABILITY-AND-EQUITY> 1,030,578
<SALES> 805,895
<TOTAL-REVENUES> 805,895
<CGS> 813,462
<TOTAL-COSTS> 813,462
<OTHER-EXPENSES> (66,391)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,518
<INCOME-PRETAX> 49,306
<INCOME-TAX> 0
<INCOME-CONTINUING> 49,306
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